Commentary: Need To Make Payment Of Tax Mandatory

^{WRITTEN BY PROF. ANTHONY EZE}
A new dawn is unfolding in the government’s tax drive as the authorities move to broaden the tax net and close in on tax defaulters.

The objective is to check tax evasion by all Nigerians, especially the moneyed class. Among the modalities being put in place to check this problem is the technology-driven Common Reporting Standards (CRC) which help the government to obtain every taxpayer’s information directly from Deposit Money Banks in the country.
The CRC is a standard programme for automatic exchange of bank accounts information on individuals and certain organizations, especially the “super rich.” Nigeria, in August 2017, joined about 35 other member countries that have signed up to CRC. The initiative is driven by the Organization for Economic Cooperation and Development, an integrated body of the member states. All countries that have implemented the standard are duty-bound to exchange information annually.
We support initiatives that can help to drive the effective implementation of government’s tax policy, provided they are in accordance with our laws and the rules guiding the relationship between banks and their customers, especially relating to the privacy of bank accounts. While it is important for the tax authorities to have information to do their job, it is necessary to protect the requirement for confidentiality between bankers and their customers, except as otherwise determined by a competent court. It is, however, disheartening that Nigerians, especially high-net worth persons, dodge taxes. This should not be so as tax revenue is needed for government to execute its developmental projects.
It is heartwarming that the CRS is coming against the backdrop of the warnings that there would be no hiding place for tax defaulters. Recently, the Minister of Finance, Mrs. Kemi Adeosun, advised Nigerians who are yet to regularize their tax status to quickly do so. The advice came when government received the report of the National Tax Policy Implementation Committee. The minister, in fact, disclosed that government has started receiving troves of documents from a number of foreign governments, revealing the astonishing assets of Nigerians stashed in their counties. The documents contain information on proceeds of business deals done in Nigeria without the payment of appropriate taxes.
Government’s concern is legitimate. Payment of tax is required by law. Non-payment amounts to breaking the law. Without taxes, government will be greatly handicapped in its ability to provide social services. Looking at Nigeria’s population and the tax ratio to our Gross Domestic Product (GDP) which, at six percent, is one of the lowest in the world, it is not surprising that statistics show that wealthy Nigerians are the biggest tax evaders.
Therefore, government’s determination to broaden the tax net is welcome. Nigeria is far behind other African countries regarding tax ratio to the GDP. For instance, Ghana’s ratio to GDP is twenty point eight percent; South Africa, fifteen point eight percent and Egypt fifteen point three percent. Last year, the Federal Government planned to bring seven hundred thousand tax dodgers into the tax net, with about three hundred and sixty-three billion tax revenue. It is not clear if it met that target. Government has also declared every Thursday, throughout the current year, as ‘Tax Day’. It is a day set aside to create awareness on payment of tax.
It is understandable that government is trying to close all the loopholes in the nation’s tax system; but yet our national tax revenue profile is low. For example, in 2016, out of five trillion naira revenue projected from taxation, only one point two trillion naira was realized. For Internally Generated Revenue (IGR), only three hundred and eighty-eight billion naira was realized, against the projected revenue of one point five trillion.
While it is indisputable that tax evasion denies the country the much-needed revenue to execute essential projects, governments must ensure a judicious and transparent use of the revenue realized from taxation to encourage the payment of taxes. Many Nigerians currently feel that the federal government is not doing much to improve their lives by providing infrastructure such as roads, stable electricity and etcetera. The government should let the people see their tax revenue being used to develop the country.