Aug 14, 2014

Nigeria’s Forgotten Revenue Sources

 A recent radio call show requested callers to express their opinions on the question of whether to pay or not to pay tax. One of the callers requested that Nigerians should not pay tax at all, since, according to him, the tax will end up in the pockets of corrupt government officials. There is no doubt the caller’s opinion rested on his youthful naivety; you cannot have a nation without taxation. Tax is, primarily, the source of a sustaining resource that every nation cannot do without.

In Nigeria, the corruption that a lot of people dread is actually made worse by the fact that a lot of them live under the tax radar and often search, in vain, for the strength that can be deployed towards fighting corruption as paying tax gives you a strong voice with which to challenge corruption. It is also the very reason why Nigerians lack the will to protest when government vehicles, buildings, office equipment and furniture are wrongly handled.

When we say that taxes aren’t collected in Nigeria, we are referring to taxes beyond what the big corporate organizations, whose taxes come in millions of naira and also documented workers whose taxes are taken from sources based on a fixed percentage of what they earn. The tax mechanism is so inefficient that in some instances, even these categories of tax-payers escape taxation, as recent events in Plateau State have shown: the state internal revenue board had to drag the University of Jos over accrued tax, to the tune of eight million naira. Also the state government had to seal the premises of the National Veterinary Research Institute (NVRI) Vom and MTN mobile phone communication company over tax evasion.

Before the Local Government Service Reforms of 1976, the local governments (known as Native Authorities before the reforms) were financially independent in the sense that they received no statutory revenue allocations from the federal and state governments as is the case today. Between 1991 and 1992, further reforms made it mandatory for 20% of federal revenues to be allocated to the local governments across the nation. Seven years later, it was enshrined in the 1999 constitution.

Thus the 1976 reforms outlined the sources of local government revenues to include rates, grants, statutory allocations, fees/charges, fines, earning/profits, loans and miscellaneous sources. Despite how “petty” these non-oil revenues may appear, the large population of Nigeria should give it some gravitas and is reason why they should be pursued with all gusto.

Today, the non-oil revenue sources have been forgotten by the states and local governments whose responsibility it is to collect them partly due to the ‘difficulty’ involved in their effective collection, an uncooperative judiciary and laziness on the side of the administrators who prefer to recline and wait for “bags” of statutory allocations that has become, more or less, the only source of their revenues. This is despite the over-staffing of most local governments due to pressures for employment that is hardly available outside the public service. Since there is too much personnel that is not even carrying out the work of a relatively fewer support-staff that public offices actually needs, the statutory allocations end up paying staff salaries rather than financing the very services for which the local governments where created. Such services include establishment of healthcare centers, provision of portable water supplies, building feeder roads, schools and electrification.

The implication of overlooking the non-oil revenue sources by the state and local governments is that those tiers of government don’t work and only wait for the subvention that comes from Abuja.

I once asked a friend who is a staff of the local government service why tax revenues are hardly collected. His responds was that the field staff got fed up going out to the field to generate these revenues only for senior officials to steal them through bogus financial claims.  According to him, it becomes even more painful when salaries cannot be paid the moment the statutory allocations are late or inadequate.

Besides the developmental significance of tax collection to any tier of government, its significance can also be seen in the discipline it instills in citizens, especially the youths who will learn that once you are an adult, you must have a commitment to your nation, that you don’t live in a nation for free, even if it means paying for the air that you breath.

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