This article attempts to look at the Nigeria
Tax administration and its capacity to reduce tax evasion and generate revenue
for development desire of the populace. It has being found among other things
that increasing tax revenue is a function of effective enforcement strategy
which is the pure responsibility of tax administration. Nigeria lack
enforcement machineries which include among other things, adequate manpower,
computers and effective postal and communication system.
Key words: Tax administration; Government
revenue; Tax evasion; Tax assessment; Autonomy.
Nigeria is
richly blessed with oil and gas among other mineral resources, but the over
dependence on oil revenue for the economic development of the country has left
much to be deserved. According to Ariyo
(1997) Nigeria's over dependence on oil revenue to the total neglect of other
revenue source was encouraged by the oil boom of 1973/74. This is unsustainable due to the fluctuation
in the oil market which have in most cases plunged the nation into deficit
budgets. It was the view of Popoola
(2009) that Nigerian tax administration and practice be structured towards
economic goal achievement since government budget for the year centres on the
oil sector. While decrying the low
productivity of the Nigerian tax system, “deficiencies in the tax
administration and collection system, complex legislations and apathy on the
part of those outside the tax net” were identified as some of the root causes. Those working in the informal sector of
Nigerian economy do not see the need to pay tax whereas they dominate the
economy. To them only, civil servants
should pay tax on their earnings and this amount to over flogging the willing
horse. Besides, the activities of the
strong union in the formal sector do not even pave way for a successful tax
policy implementation in the formal sector (Ayodele 2006). Even revenue collection officers seem to be
lenient or even connive with those in the informal sector during enforcement of
tax policies. All this leads to revenue
loss.
In other to
reawaken the consciousness of Nigerian government and citizens on the effective
use of taxation as a developmental tool, and examine the effect the tax system
have so far on the economy; this article becomes very relevant. There is no doubt that taxation must have
affected the economic development of Nigeria.
Effort shall therefore be made in this research to see how much Nigeria
have been able to achieve her economic goals with her tax policies and
administration. The administrative role
of the Federal, state and local government shall as well be examined in other
to identify the causes of tax evasion and avoidance.
Globally,
government is saddled with the responsibility of providing some basic
infrastructures for her citizens. Among
these are the provisions of Schools, Hospitals, construction Roads, Bridges,
Railway lines, Airports and seaports. More so is the security of the life and
properties of the citizens in the country against foreign and or local
aggression. Abdulfattah, O. et al
(2010), stated, “Most south east governors are spending fortune to keep the
Police and other security agencies”. The stabilization of the economy, the redistribution
of income and the provision of services in the form of public goods are among
other functions or obligations government may owe her citizens. Miller and Oats (2009:4) noted that due to
the inefficiency of the private market, the provision of public goods such as
security of life and property which the public might not be prepared to pay for
directly, are left in the hands of the government rather than the private
market. James and Nobes (2008) observed
that even without payment, the consumption of “pure public goods cannot be to
the total exclusion or in isolation of certain individual. Government therefore, makes it free for all
and sundry. A very good example is in
the area of security e.g. Police, Arm Force etc. Their services cover all the citizens without
specific charges to the people. Besides, public goods do not diminish as
consumption increases. Simply put, the
consumption of public goods by one person
does not stop or prevent another from consuming it neither does it
reduce the satisfaction the later consumer will derive from its
consumption. It is on the strength of
the above two reasons that it becomes practically impossible for the private
market or firm to produce public goods as the resultant effort could be
underproduction of such goods and services.
Having stated some of the
functions of government to the citizens using taxation as a tool, the objective
of taxation can therefore be summed up as:
Raising revenue to
finance government expenditure.
Redistribution of wealth and income
to promote the welfare and equality of the citizens.
Regulation of the economy thereby creating
enabling environment for business to thrive.
Taxation is
therefore, one among other means of revenue generation of any government to
meet the need of the citizens some of which have been pointed out above. According to Public Finance General
Directorate (2009) the purpose of taxation as enshrined in the French laws is
“for the maintenance of public force and administrative expenses”. Miller and Oats (2006:3) maintained,
“Taxation is required to finance public expenditure”. It is worthy of note however, that there are
other sources of revenue generation by
the government e.g. borrowing, grants etc.
If taxation is for public expenditure, public goods ought to have been
consumed equally. The elites in the
society have retinue of security men attached to them for protection especially
in emergency cases but not the common man whose safety is just by implication
even when they represent a higher percentage of the taxpaying population. Since the use of most of the facilities for
which the general tax revenue is raised as a right for some compared to others,
tax therefore remain a punitive levy on the deprived of these services. This is even worsening with the definition by
Nightingale (2002:5) “…imposed by government while taxpayers may receive
nothing identifiable in return for their contribution….” Osunkoya (2009) on his part warned, “Payment
of tax does not mean that government must do something within the locality of
the taxpayer”. These respected tax experts seems to forget that evidence of
taxation seen in public goods encourage the taxpayer.
This may
account for the high evasion rate as tax is assumed exploitative instead of
development. Popoola (2009) observed
that people do not pay tax because of the “culture of give and take”. The epileptic services of some of the social
amenities financed with tax revenue in developing and underdeveloped countries
left much to be deserved. Popoola (2009)
asserts that electric supply and social infrastructure need to be financed with
taxpayer’s money. Ordinarily, nobody
would want to make “compulsory payment” for substandard goods or bad services. Gordon (2010) argued that corporate and
personal income taxes create distortion. High tax rate distort the demand and
supply of labour hence productivity is impaired. Some countries tax system is structured
purely towards revenue generation and that has negative effect on the
economy. Very low tax may impact on
education as a larger population will prefer to work than school but a very
high tax might reduce productivity as people would prefer longer leisure
hours. This does not enhance economic
development. Laffer (2009) cautioned
that “A government simply cannot tax a country into prosperity”. As important
as tax revenue is to a nation, many people still find it difficult to comply
with their tax obligation. According to
Nightingale (2002:6), “No one really likes paying taxes yet they are inevitable
for the provision of social welfare”.
With the exception of countries like UK,
America, France and a few others where taxation seems to be the main sustenance
of the economy, every other nation almost look up to the government as the
almighty provider. Some argue that
payment of taxes to the government is just a way of enriching the selected few
political elites who have fortified themselves with powers unquestionable.
Others believe that they are not getting enough from the government in return
for what they are paying; a lot more believe that government is so rich that
imposing tax on the people is another way of exploiting the innocent
citizens. The excuses for non-compliance
with tax obligations are enormous. In
all, these reasons though with some relevant facts, amounts to share ignorance
as the importance of tax revenue cannot be overemphasised. Ordinarily, people abhor tax payment due to
its effect on their income. Owens (2006)
noted that only a few people are enthusiastic about paying tax. Tax policy must be generally accepted by the
people if it must gain compliance (Nightingale (2002). It therefore means that a good tax system
must be in consonance with (Adam Smith 1776) cannon of taxation cited in Nightingale
(2002): Equitability, Neutrality, efficiency, flexibility and simplicity.
Diversification
of revenue sources for economic development is very important if Nigeria must
rank among equals in the improvement of the lives of her citizens. The focus on revenue from oil and gas amounts
to putting all her eggs in one basket.
In this modern days the speedy technological development will in no
distance time render obsolete the use of such mineral resources like oil and
gas and possibly replace same with solar energy which is more environmental
friendly. Besides, the end of
fluctuations in the oil price which characterise the oil market is not in
sight. Therefore, to build and maintain
the culture of sustainable development, there is urgent need for a review and
restructure of the nation’s tax policy and administrative system. Why
government takes step to address the perennial annual budget deficits and tax
gap, the citizens should wake up to their civic responsibilities in terms of
tax compliance. Unless the citizens work in hand with the government, every
effort of the later to better their lives may prove abortive. Inequitable tax which is one of the major
problems in taxation was promoted by the actions of those in the informal
sector. However, government should note
that it is not possible to tax a nation into prosperity.
High tax
rates will not only increase evasion but will equally discourage
investment. This is the case of fiscal
neutrality. Economic decisions may be
influenced due to high tax rates and that may impact negatively on the nation’s
economy. (Bowles 1999) cited in
Richardson 2006, posit that the higher the marginal tax rate, the higher the
likelihood of evasion. In this era of globalization, unfriendly tax policies
may create room for capital flight from Nigeria to other countries with more
relaxed tax policies. The move towards
borderless world has opened up new opportunities for taxpayers to minimise
their tax liabilities (Owens 2006).
Government should not only create an enabling environment for business
establishment but also give all necessary support for its survival because
profits of businesses are one of the major sources of tax revenue.