You know, every question on tax always start with a tax to Gross Domestic Product (GDP) ratio of six per cent. For me, it is rhetoric, unfortunately. But fundamentally, if you really want to get tax level to increase, you have to grow the economy.
When the economy is not growing, you can’t expect the tax level to increase. So we need to really get back as a country and say to ourselves what is the minimum growth rate we need to drive this economy. I’ll give you an example: After Tiananmen Square in China in 1989, the Chinese government decided that so as not to have a repeat of what happened, minimum growth rate would be eight per cent. And they achieved eight to 10 per cent for about 25 years and transformed the economy. Fundamentally, because it took many people out of the low-income economy to middle-class and they had much more to pay taxes. That was one aspect. Another major aspect is the issue of trust. Taxpayers need to see what they are using their money to do. That is because if you are using the money to clear expenditure or finance elephant projects, then why shouldn’t we pay tax? In that sense, it is granted as a civic duty and everybody must pay tax. But the reality is that countries where the political leaders or those at the helms of affairs do not use tax money to grow the economy, would find that in such situation, trust will be broken. And for Nigeria, that is the first step. Lagos State government over the last 20 years has tried very hard and improved the trust situation significantly. I could remember very well in 1999, when Bola Tinubu became Governor, the Internally Generated Revenue (IGR) was about a billion naira, but today, as at last count, it has gone to over N30 billion. And you see what is happening in Lagos in the last 20 years? They still have a lot of work to do, but there has been a lot of transformation around the way the city has developed over time, using mainly taxpayers’ money. So to recap, if there is no growth, you won’t see an increase in tax rate and you can’t tax businesses that are not doing well. When a company is making losses, it will make tax not work. And you can carry losses forward for a number of years, which means that if you make profit the following year, you are recouping and still will not pay full taxes. To cut it short, many countries use taxes to drive investments because low taxes means that it affects investments. And finally for me, we have to move away from the way we do our budget. This is because fiscal policy for me is about how we grow the economy; how we drag the economy to be attractive for investment and how do we use that investment to ensure that we can create more revenue sources and also to get people to pay more taxes. We have always focused on appropriation. So, every year the National Assembly prepares the budget and after a long debate, it turns into an appropriation bill. Many countries have moved away from the Appropriation Bill, into more of a Financed Bill, which reflects the fiscal policy of the government, which includes just numbers, how we are going to spend, and how we are going to drive revenue. But if you want to make amendments to the tax law, you don’t have to wait until amendments start, you can use the Finance Bill every year, then treat the tax law regularly so that you can actually have revenue sources clearly in the Finance Bill; drive revenue sources and it’s a more balanced document for everybody to understand and read because there you have the revenue side; that’s the fiscal policy, you have the spending side based on recurrent and capital expenditure. And of course, one day, the oil revenues that we have today, will not be there, so we need to prepare for the long haul when the revenues from under there are no longer available.

Source: This Day

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