Tenacity, wisdom and empathy are required to push the much-needed reforms through, writes Monday Philips Ekpe
The 19th Century French writer, Jean-Baptiste Alphonse Karr, was right. “Plus ca change, plus c’est la meme chose. (The more things change, the more they remain the same).” The article I wrote in the October-December 1995 edition of the London-based Safara International Magazine for Business and Leisure in Africa, now elicits déjà vu. Titled “After SAP Comes VAT”, it attempted to weigh the performance of the major fiscal revolution that was introduced only two years earlier.
It reads in part: “The general basis for the popular pessimism was the failure of government to productively harness and utilise Nigeria’s financial potential over the years. Indeed, the view (which is not entirely out of place) is that the public sector is more adept at allocating or consuming than at generating or producing useful resources…. The din of rejectionism that greeted the introduction of Value Added Tax (VAT) sounded much more believable since, like most other tax systems, it depended much on the willingness of tax payers for its success.
“Experts affirm that tax payers’ response to taxation is often influenced by the state of the economy, the popularity of the government of the day and the dexterity of the tax administrators both to collect taxes and penalise tax evaders. The truth, however, is that the Nigeria of today does not really qualify to implement VAT if these parameters are considered. Yet, VAT has become Nigeria’s newest goldmine. In May this year alone, the 30 state governments and Abuja got about N386million as their allocations while the local governments got about N276million in the same month.
“The sad thing is that roads, schools, hospitals, water projects and other social amenities are yet to be given adequate attention. Right now, the revenue yield is high but how that will be sustained will depend very much on whether or not the government satisfies its own side of the bargain…. VAT is increasing in profile. But will it be like oil? Will it be used as a vehicle for development or will it become another pot of gold to squander? The years that lie ahead will tell.”
Three decades down the line, drawing comparisons between what obtained then and now may not be fair as the enabling variables have shifted drastically. For one, although the political atmosphere that General Sani Abacha presided over that time was fouled and overshadowed by the aborted presidential mandate of the late Chief Moshood Abiola, the economy then registered one of its most stable periods in the country’s history. Abacha and his aides apparently seized that glorious moment to optimally position a tax that was ironically loathed at inception. Today’s economic climate is manifestly antithetical to that era.
The hysteria that has broken out in the course of the ongoing moves to reform the existing tax laws is, no doubt, a reminder that the tax collector is still not a well loved and received person after centuries of the practice of compelling citizens of countries around the world to directly contribute their money towards nation-building. Of all the four relevant executive bills before the National Assembly – Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service Establishment Bill and Joint Revenue Board Establishment Bill – the aspect that deals with VAT has raised dust the most. And for good reasons. It’s now reported to yield more for the country than the almighty oil sector, among others, with the potential to do even much more.
One key mystique of VAT is that most payers aren’t usually conscious of the obligations they meet at the points of payment, hence the inconsequentiality of their anger towards the mostly unaccountable governments. They simply consume and pay automatically! And since we’re largely a nation of consumers, ceaseless inflow of cash into public coffers is guaranteed.
Unfortunately, politicians and some other leaders have thrown sectional and other base sentiments into the mix, as usual. Arguments of the north being deliberately targeted for ill have injected sour taste into what should have been robust engagements for genuine progress. Equally sad is, this season provides yet another opportunity to paint the north as ignorant and indolent, not willing to let go of its ‘parasitic’ existence. But these sickening underbellies can only further push Nigeria down the path of underachievement and self-defeat.
But what can save Nigeria from these divisive tendencies, even when faced with existential questions? In the words of a former Speaker of the House of Representatives, Rt. Hon. Yakubu Dogara, “we should remove the cap of regionalism, the cap of sectionalism, the cap of religion and put on the cap of leadership because that is what will resolve the quarrel that we have. One of the major objections is related to the issue of timing. When you talk about timing the way I have heard them talk about it, it is a tragic misconception of the notion of time itself because there’s nothing like the future. There’s nothing like the past. All we have is now. It is what you are doing now that will become your past. It is what you are doing now that will affect your future.”
Of course, his philosophical interpretation of the time factor can complicate this matter, especially for the uninitiated. For average Nigerians, the picture they have is the past, present and future that are mixed together and controlled by the twin monsters of misappropriation and theft. This opaque and bankrupt utilisation of monies derived from taxes is enough disincentive to tax compliance. So, any discussions relating to these fiscal schemes may well be exercises in cacophony. From experience, the current debate is truly not about the poor. It’s more about the elite, those self-indulgent leaders who nevertheless love to be viewed as being in the business for the general good.
The other day, the Chairman of the Presidential Fiscal Policy and Tax Reform Committee (PFPTRC), Taiwo Oyedele, tried to market the reforms. His words: “There are tax exemptions for small businesses with annual turnover of N50 million or less, including withholding tax, value added tax, and zero percent corporate income tax rate. It also proposed an exemption from personal income tax (PAYE) for minimum wage earners and reduced tax burden for over 90 per cent of all workers in the private and public sectors, as well as VAT at zero percent for food, education, health care and exemption for rent, public transportation, fuel products, and renewable energy. These items constitute an average of 82 percent of household consumption and nearly 100 percent for low-income households to ameliorate the rising cost of living for the masses….
“Our proposal aims to create a fairer system by devising a different form of derivation, which takes into account the place of supply or consumption for relevant goods and services, whether they are zero-rated, exempted or taxable at the standard rate. A state that produces food shouldn’t lose out just because its products are VAT-exempted or consumed in other states. The state where the supply originates should be recognised for its contributions. The same principle should apply to services like telecommunications—VAT distribution should reflect where subscribers are located.” The man has been rolling out more advantages of the package he’s determined to pursue to their logical conclusions.
Oyedele and his team shouldn’t relent. But they should be mindful of the acute acidity of the atmosphere at present which makes thinking straight difficult even for the usually rational. The VAT, against some initial odds and sundry negative predictions, is a success story. Its management and distribution needn’t cause any earthquake. Like gold-refining, much patience, understanding and skill are required for greater productivity and cohesion. And, hopefully, an enduring, bankable legacy.
Ekpe, PhD, is a member of THISDAY Editorial Board.
