President Bola Ahmed Tinubu has proposed tax reforms which appear fair and inclusive. But, as Uche Igwe writes, there are historical reasons why members of the public and the political elite don’t trust his intentions.
The ongoing conversation about introducing tax reforms in Nigeria is fascinating. The new policy represents a fiscal framework tailored towards sustainable economic growth. The Nigerian government has done well to break down the story so that ordinary people can understand why it is needed and what it is trying to achieve. A review of the provisions and propositions of the reform suggests the proposals can help build an equitable, fair and inclusive economy. The reforms exempt low-income earners from pay-as-you-earn, while offering reduced rates to those earning less than 1.7 million naira (£870) a month. Eliminating value-added tax (VAT) on essentials like food, health care, education, and electricity will also be helpful. Furthermore, exempting small businesses from company income tax and withholding tax will help the economy grow. Overall, the intention to modernise the country’s tax system is welcome.
Despite that, arguments have raged across the political spectrum. The debate offers an opportunity to interrogate the relationship between the state and the citizens in Nigeria.
Citizens do not trust the President’s motives
Research has revealed that trust in government is one of the most critical factors determining tax compliance in Africa. Citizens are more likely to pay their taxes when it is perceived that the government will be fair and transparent in using tax revenue for public benefit.
President Tinubu was declared the winner of one of the most controversial and flawed elections in the country’s history. This was after a very intense campaign which saw the unrestricted use of caustic and divisive language anchored on entitlement mentality and religious exclusivity. As if that is not bad enough, he has appointed people predominantly from one part of the country to every available position. Even those who campaigned for him have graduated from murmuring to expressing their discontent publicly in the media. Even loyalists of the President allege that some positions are available to be purchased by the highest bidder.
This hostile political atmosphere coincided with the introduction of the reforms. Despite the eloquent presentations and the supportive numbers, there are sections of Nigerian society that will neither listen nor comply. This is because they do not trust the President enough. It is indeed possible that President Bola Tinubu has the best intentions for the country’s economy to thrive. However, he has historical baggage of introducing reforms implemented and managed through entities purportedly linked and intended to benefit him.
Tax collections through third parties have been in vogue in Nigeria over the last ten years, especially at the subnational levels. These agents, often proxies of influential politicians, collect revenue using private accounts on behalf of the government before remitting the balance to government coffers. A company known as Alpha-Beta Consulting was awarded the contract in 2002 to collect all the internally generated revenue due to Lagos State. It was later revealed that the company’s owners had links with now President Bola Tinubu, who was then the governor of Lagos state. The ownership and control of the company became a subject of litigation. However, the parties involved quietly settled the matter out of court.
The Alpha-Beta case remains in the public consciousness. Regardless of the merits of the reforms, or the intentions of the President, Nigerians continue to suspect his motives, believing that he is on another mission to benefit himself under the guise of a new tax system.
Trust must be rebuilt for citizens to comply with reforms
Many prominent Nigerians have spoken positively about the reforms – which is great. Both the former Speaker of the House of Representatives, Yakubu Dogara, and the fiery cleric Sheik Gumi have endorsed it and dismissed insinuations in some quarters that the bill favours one part of the country more. The forum of Nigerian Governors supported it with minimal suggestions.
Despite this support, the government must confront the erosion of trust between it and its citizens. Rebuilding that trust requires work beyond a compelling PowerPoint presentation. Those wanting to raise additional revenue must convince citizens it will translate to broader public benefits. Nonetheless, the National Assembly will likely pass the bill very soon. Whenever the bill is passed, full compliance by citizens is unlikely as resistance and sabotage may be widespread. It is no longer easily acceptable for Nigerians to take the message and leave the messenger. The sad truth is that the ghost of Alpha Beta company is haunting the ongoing tax reforms and may not go away in a hurry.
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