Plans by the government’s economic management team to raise more money locally to finance the 2016 budget may help or hinder economic recovery, depending on how tax windows are harnessed.Correspondent SAM NWOKORO reports.
President Muhammadu Buhari said before presenting the budget to the National Assembly (NASS) that his administration would look inwards to raise funds to balance the N6.8 trillion budget.
The budget has about N2 trillion deficit, meaning borrowing or taxing to bridge it. Borrowing comprises local and foreign components.
Finance Minister, Kemi Adeosun, said the government would borrow about $5 billion and the balance would come from improved revenue collection and expanded tax base.
Most people agree that the economy is bad in every sector, notwithstanding bailouts by previous administrations, yet development experts believe some tax windows exist from where the government can derive sizeable revenue.
Chucks Osuji, an economist and a public affairs analyst, recommends taxing the rich by looking at tax rebates and incentives given over the years, some of which may have expired.
“The government could make up for the deficit by reviewing the tax system with a view to compelling the rich to pay more. That is how to moderate capitalism and the acquisition of private property. Every big economy does that,” he explained.
“The United States has done it right from the time of Bill Clinton up to the time of Barack Obama.
“Clinton focused on workers’ retraining and expanded the frontiers for the middle class and youth. Obama followed a similar pattern and achieved more in healthcare reforms.
“Buhari can also attempt that through various forms of tax incentives for small businesses and increase the tax paid by the rich and vulgar, most of whom have benefitted from the high wire byzantine deregulation era of the Olusegun Obasanjo regime down to the Goodluck Jonathan era.”
Osuji said most incentives in the form of bailouts and rebates given since 2006 may have expired by now, so the beneficiaries should start paying tax to revenue collection agencies.
Below are some of the other tax windows available to the government:
Aviation
There are about 200 private jets in Nigeria worth over N1.8 trillion or $6.7 billion, some of them used for commercial purposes.
In 2013, the Federal Aviation Authority of Nigeria (FAAN) introduced general aviation charges of $3,000 for private jets used for commercial purposes, but private jets used for private businesses were exempted.
The then FAAN spokesman, Yakubu Dati, explained that “Nigerian registered aircraft in this category would pay $3,000 or about N480,000 per flight while aircraft with a foreign registered number would pay $4,000 or about N640,000 per flight.
“The charges are not meant for everybody that has and operates private jets but for those who use them for commercial purposes, including those who use foreign and locally registered aircraft.”
However, the FAAN has not been faithful in implementing the charges since the announcement in 2013.
The government should thoroughly enforce the charges which are being implemented haphazardly because of the clumsiness that enables some private jet owners to dodge the tariff.
An aviation security practitioner, who gave his name simply as Adewole, said: “That discriminatory charge on private jets, non-scheduled jets and locally and foreign registered ones left a lot of holes that make it possible for some to pay while others do not pay up to what others pay.
“I think the government should harmonise that. All private jets, whether locally registered or not, whether used for commercial purposes or not, should pay the same charge.”
Enforcement of forex policy
Another revenue devise the present administration has forced down the throats of Nigerians is the policy of the Central Government of Nigeria (CBN) that listed 41 items whose foreign exchange (forex) needs should not be sourced from the official window.
The calculation, both by economists and lay men, is that the policy would kindle productivity, engender patronage of locally produced goods, and gradually firm up the naira against other currencies, aided by the growth of foreign reserves.
In the long run, according to this permutation, an expanded productive base opens tax windows for non-oil internal revenue generation, in addition to creating employment.
However, the problem is, how long and how well can the government do the policy engineering, implementation, and monitoring of compliance to due diligence?
Former CBN Governor, Lamido Sanusi, has carpeted the forex policy saying, “it encourages corruption and rent seeking now similar to the fuel subsidy regime.
“The country’s woes are now being exacerbated with the currency peg, and restrictions in forex market are creating a lot of speculator and precautionary demand.
“Exporters and investors are holding on to foreign currency as no one would sell at the rate the government is setting while the government does not have the reserve to keep the exchange rate at its official level in the market.”
VAT
Another sphere where the government is expected to scrounge for revenue is Value Added Tax (VAT).
There is a school of thought that the VAT bracket should expand to include luxury goods and services that were not in existence when VAT was introduced in the 1990s.
Such goods and services that are affordable only by the rich include spas in upscale areas, boat leisure cruise, and review of permits for use of government premises for personal social activities.
Pius Okwu, a tax expert, said the authorities should set up an effective tax tribunal as is done in some advanced countries.
He added: “Economic activities are getting complex and almost every human activity is regulated by law.
“Nigeria has weak institutions, including the judiciary. Law suits connected to the economy need not stay too long in the courts. They need to be disposed of as quickly as possible.
“So, there needs to be a VAT tribunal to convict and penalise tax evaders. That way VAT payment would raise a lot of money for the government. Many enterprises and people do not pay tax in Nigeria.”
Expired tax rebates
It is possible that many companies, enterprises, and individuals are still enjoying tax holidays since the scheme was introduced in 2006.
Tax rebate is a financial incentive packaged to give tax holiday to some category of businesses, especially those in Free Trade Zones. Others include businesses in agriculture – rice production, sugar plantation, et cetera.
An economist, Goodluck Nwakanma, said: “At this period Nigeria needs to look back at most of those companies that have been enjoying rebates over the years.
“We, and any business for that matter, are inclined to dodge paying tax if convenient.
“So the onus is on government agencies to find out those businesses whose rebates have lasted for up to 10 years and cause them to commence paying the appropriate taxes.
“Most of them are in the free trade zones scattered all over the country. I think those rebates and tax holidays have run their course.”
Property tax
Property tax in Nigeria is poorly evaluated, and collection and remittance are characterised by compromises between property owners, especially real estate owners, and tax collection agencies.
The real estate sector is poorly taxed because of the uncoordinated and multifarious operators and their modus operandi.
Church, mosques, charities
Another tax window is non profit organisations (NPOs) or non governmental organisations (NGOs). Most of them are faith-based, especially churches and mosques.
Statutorily, they are not expected to pay tax on their income, even though some have subsidiaries like blue chip companies in all sectors of the economy.
The secular business are subsumed in the name of the church or mosque, and by this method, they do not pay corporate tax; denying the government that provides security for them its legitimate revenue.
Some big churches and Islamic groups with foreign networks and affiliates perpetrate forex round-tripping. Advocates argue that the government at all levels should tax faith-based NGOs.
“The problem with us is hypocrisy and interest peddling,” said an associate professor of philosophy in a federal university, who did not want his name and that of the school in print.
“It is high time churches and mosques in this country started doing things the way things should be done. Elsewhere, charities are taxed on the income they make.
“Religious bodies in Nigeria do not even deploy their income on charitable purposes for which they enjoy tax exemption.
“How many of them have true empowerment projects? They do all kinds of crooked things under the cover of religion, even dodge paying legitimate taxes. It ought to stop.”
• Continues in next edition.
