Tax, tax, tax. This word has become provocative whether you’re talking about it in political circles, in business environments or in social settings. As the US Election Day draws closer, ‘tax-talk’ has been a major topic of discussion and debate with controversy surrounding the release of the US presidential nominee Donald Trump’s tax returns. American comedian, Chris Rock, once joked, “You don’t pay taxes – they take taxes”. So, what are the principles and objectives of taxation? Revenue derived from tax makes way for the provision of public goods and services such as public education and healthcare for the citizenry. Tax monies provide the government with resources to improve infrastructure and combat terrorism – all these benefits can take place when strong, autonomous, transparent and accountable institutions are put into effect.
With all of this ‘tax-stuff’, I now turn to the vibrant nation of Nigeria, where unfortunately the economy has experienced a hard hit after the fall of oil prices. On 31 August, BBC reported that Africa’s most populous nation slipped into an economic recession. With this kind of difficult economic environment in Nigeria, having a ‘tax pep talk’ is perhaps the last thing any Nigerian wants to hear about. As well as serving as a device in campaign rhetoric, in many countries, ‘taxes’ are automatically synonymous with ‘complaining’ and ‘dodging’. However, this is an opportune time for Nigeria’s government to look beyond oil for revenue.
Let’s talk about tax, shall we?
The Nigerian government has to improve its tax laws and tax evasion penalties if it wants to improve its revenue base, make adequate investments in public education and health, and strengthen the private sector by pursuing infrastructure developments. The most recent World Bank’s Ease of Doing Business Index ranks Nigeria at 181 (out of 189 countries) when it comes to paying taxes. To draw some comparisons, the United States is ranked 53, South Africa 20, and the United Kingdom 15.
Governments including Finland, Denmark and Norway heavily invest in public education, and interestingly, they are all ranked in the top 20 when it comes to paying taxes. The fact of the matter really is that when a government has a large tax base (thanks to good employment prospects for the citizenry), it has a better chance to derive sufficient revenue for its various programmes. These programmes are for the benefit of those living within its borders.
During an interview on CNBC Africa, the Executive Chairman of the Lagos State Board of Internal Revenue said that tax collection efforts should be bolstered. The tax system should be revamped to place new responsibilities on sectors of the Nigerian economy that have been on the rise; for example, the media industry has been growing thanks to Nollywood and music.
Can anything good come out of the word ‘tax’?
In a dynamic country like Nigeria, it is unfortunate that the unemployment rate is high, especially among the youth. This means that the youth have to be the job-creators. But how can they create jobs? The answer is through entrepreneurial ventures. As a young person, why wait for a job when you can create them for other young [as well as older] people who face unemployment, are idle and are on the verge of poverty?
Nigeria’s youth are buzzing with ideas that have the potential to transform the country and indeed the world. However, they need the government’s support in the form of youth programmes that would provide funding and support to their small and medium sized enterprises. But where will the funding come from? At this time, it cannot come from oil revenue. But how about tax collection? As these enterprises prosper and become more profitable, they will in turn employ more people, thus providing a boost to the economy. The net effect will be a broadened tax base from which the government can collect tax revenue to support other youth programmes.
A single step … in the tax reform direction
As the oil bonanza has lost its momentum, it is imperative for Nigeria to look for other sources of revenue, making it an opportune moment to talk about tax reform.
Tax reform may be the last thing anyone wants to talk about, but it is one of the fundamental keys to pulling Nigeria out of a gloomy economic future. It is certainly not a quick fix nor is it a final answer, but rather a long-term approach. The vibrancy of Nigeria’s youth will provide the momentum needed to channel and sustain the required policy reform towards a prosperous path. It is therefore crucial to pursue policies that will manifest the true potential of a great nation full of dynamism and culture. The Nigerian government must carve a path for the youth who are not only leaders of tomorrow, but today’s job-creators.
Mary-Jean Nleya is an Ambassador representing Botswana. She is a researcher and student at Harvard University.