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Published On: Fri, Mar 2nd, 2018

Taxation and good governance (1)

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By Eze Onyekpere

We are living in interesting but difficult times in Nigeria. Opportunities for reframing and re-designing the agenda for development and democracy have been presented in the nature of a fiscal crisis with the crash in the price of crude oil which is the mainstay of the Nigerian economy. Whether we recognise the challenge as an opportunity and take advantage of it will be a key factor in the continued progress and sustainability of Nigeria. To take advantage of this opportunity will involve a change of the culture, attitudes and philosophies surrounding governance at all levels.
It is imperative to start by recognisng that Nigeria’s oil rents were largely stolen and badly mismanaged. The rents are no longer as large as they used to be; so, the question of mismanaging the little that is available is totally out of the picture for now. The efforts of the Muhammadu Buhari administration to recover stolen funds are indeed commendable. However, even if all the stolen wealth is recovered, it will still not meet our needful demands for financial resources to start the development chase. In this case, governance should be about multi-tasking with various task teams contributing to the larger goal of good governance, deepening democracy and development. Thus, there is already a strong team on the anti-corruption agenda. We need strong task teams in the various facets of the economy from power to roads and railways to general economic policy and directions on the value of the naira, local content and increasing value added.
Herein lies the essence of change; we cannot afford to continue doing more of the same things and expect new results. There are many areas we can change to kick-start the process. For instance, the extant leadership of the Senate and House of Representatives promised transparency, accountability and opening up of the National Assembly. However, we still have a 2016 budget estimate in the parliament that is just a bulk sum; there are no details. This goes against the grain of all canons of transparency and accountability.
In 2014, the Centre for Social Justice got a court order compelling the erstwhile Minister of Finance, Mrs. Ngozi Okonjo-Iweala, to publish the details of the statutory transfers including the details of the allocation to the National Assembly. She failed, neglected and refused to obey the order and contempt proceedings to ensure that she obeyed the order suffered several adjournments at the instance of the court until she left office. Beyond opening up the budgets of the National Assembly and other agencies getting statutory transfers, the 2016 budget estimates need to be cleaned of frivolities, inappropriate and wasteful expenditure.
The good news is that there is life beyond oil rent and the enclave economy of oil and gas. Since we failed to take advantage of oil rents during the period of boom, we should quickly make a detour and come back to our senses and have a national dialogue on how to fund governance through taxation. The fixation on borrowing to finance the deficit is not the way forward, even if it offers a temporary reprieve which we will soon face its downsides in the next couple of years. Already, we are spending close to 35k out of every N1 to service debts and this will definitely increase in years to come. So, what are we left with to revive and boost our economy?
Taxation which has been neglected over the years comes to the rescue. I make bold to state that our democratic deficits in the lack of real citizens’ participation in governance is based on the source of funding of governance. Oil rents discouraged the rulers from engaging the people in dialogue about development priorities and how to properly manage public finances. The rulers also did not need a dialogue on how to raise revenue which came in from rents.
Thus, rulers could carry on without the necessary engagement and dialogue with the people required in every modern state. On the other hand, citizens were alienated and did not see the resources government managed as their own. No nexus existed between the people and oil rents except persons living in communities that suffered environmental degradation from oil extraction. Elections were rigged as they became a do-or-die affair and the state got captured by a few men and women of power.
With the absence of dialogue and engagement between the people and their government came the unbundling of the social contract. Government did not feel it had any duty to account for resource management to the people and the people made little or feeble demands. Thus, the self-fulfilling prophesy of a weak collapsing state emerged. In an efficient and effective taxation system, the state is focused on getting revenue through taxation and in the process, can only tax taxable income which is a product of production of goods and services. Therefore, the state will be interested in providing the enabling environment for such production to go on before it can earn revenue. It will then ensure it collects the revenue to run its affairs.
Once the bulk of Nigerians begin to pay appropriate taxes and many more get into the tax net, demands for accountability and transparency are bound to increase. Fiscal governance issues will no longer be left to experts and the activists. I do not see why sufficient numbers of Nigerians are not enraged when about a hundred million is budget for kitchen wares every year at the federal level or when the presidential air fleet includes about ten aircrafts. No sane person should tolerate a situation where a poor neighbour who could barely pay his rent becomes a local government chair person and within six months, begins building mansions across the city.
Yes, if local government tax authorities squeeze your hard earned money from you, the minimum you can do is to insist on it being properly used in an area where you can derive maximum benefit. We will part with our money in exchange of favourable policies protecting our interest. And if Nigerians pay tax, they would likely begin to be more conscious of protecting their votes to disallow rogues from entering public office to mismanage tax payers’ money.
Admittedly, in no society do people want to part with their hard earned money to the authorities in the form of taxation. People generally seem to pay taxes grudgingly. Recalling the American protest against the British colonialists of “no taxation without representation”, our case is the right opposite. We are claiming rights to elect the executive and legislature without a concomitant duty of paying taxes to fund their work.
Clearly, we are creating an unfunded mandate which is definitely not the way for effective governance. It was possible to create bloated bureaucracies and no one cared because we were not paying for their upkeep. It was also possible to create and keep the demand for new states as an ongoing venture because we were not paying the cost of running the states. As the oil rent runs out, every state in Nigeria has to practically fend for itself even though there will be little federal transfers. We may then sit at the table to determine whether it made sense to create the number of extant states across the federation.

Onyekpere is an Abuja based legal practitioner.

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