Nami’s lame lamentation over low income tax collections

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Federal Inland Revenue Service chairman Mohammed Nami on Friday lamented Nigeria’s low tax income and blamed it on the unwillingness of many Nigerians to pay income tax.

He revealed that Nigeria has 41 million personal income taxpayers compared to four million in South Africa, but the total amount of tax revenue in the country remains low compared to South Africa’s figure.

While Nami might be right to complain about Nigeria’s appalling performance in paying and collecting taxes, he should instead look beyond the surface and situate it in the economic conditions prevailing in the country.

Although Nigeria has the largest economy on the continent and as such the country is considered the richest country in sub-Saharan Africa, the reality is much more than that as the economic outlook is bleak.

Nigeria with a gross domestic product of 514.05 billion dollars against 394.28 billion dollars for Egypt and 329.53 billion for South Africa is drawn by an economy dominated by hydrocarbons and its position is substantially maintained because of its petroleum resources and not because of its diversified production base.

Unlike South Africa and Egypt which are more industrialized and developed in terms of manufacturing sector, the Nigerian economy is largely rent-seeking with huge portfolio companies taking advantage of the corrupt public sector for recover the petrodollar for personal use.

In addition, Nigeria, with per capita income of $ 2,073 in 2020, is well below South Africa’s per capita income of $ 5,194 in 2020 and behind Seychelles at $ 9,700.

For the uninitiated, per capita income is a measure of the amount of money earned per person in a country or geographic region. Per capita income can be used to determine the average per capita income for an area and to assess the standard of living and quality of life of the population.

It just means that the countries with which the FIRS chief compared his income tax collections are far ahead of Nigeria in terms of the earning capacity of their citizens.

Nigeria’s official unemployment rate is 33% in the fourth quarter of 2020 compared to South Africa which averages 28.74% over the same period. It is an indication of the poor environment in Nigeria which cannot help the citizens to create wealth.

In addition, with the country’s debt of 35 trillion naira in June 2021, which is estimated at 23% of GDP and continuing to increase, and debt service to income of 74%, Nigeria needs more than ‘a miracle to get out of its economic slump.

While Nigeria is a land of opportunity with abundant human resources, the problem with the country is the lack of political leadership to help galvanize the population towards productivity and harness the enormous wealth that abounds there.

Nigeria has today become a huge graveyard of dead manufacturing factories which, until the mid-1990s, provided the solid foundation for the country’s economic prosperity.

Today Dunlop, Michelin, Berec, Peugeot, Volkswagen and others have gone out of business due to the harsh economic environment created by a corrupt system and have moved to other climates where the environment supports production.

Most of the fast-growing consumer products companies, which previously produced household products, beverages and other food products for the rest of West Africa, now import their products from neighboring Ghana into the country. and simply label them “made in Nigeria” to give the impression that they continue to produce in the country.

The payment and collection of taxes are products of productivity and economic dynamism and without a productive economy; tax revenues would remain low.

As it stands, Nigeria does not seem ready for the kind of work that would allow it to realize its full potential and produce the economy that helps the citizen pay proportional taxes to increase their wealth.

The most prosperous industry in the country today is politics and its allied sectors. Other sectors are simply struggling to survive the difficult economic environment and the unfavorable and debilitating business environment that has put the country in reverse growth.

Currently, the country is grappling with a shortage of foreign currency, which has created space for great trade-offs with a privileged few taking advantage of the situation to enrich themselves while industries that need forex to survive lack it.

It is a country that borrows huge funds in the name of building infrastructure, but unfortunately most of the money is wasted on corruption.

The cost of building per kilometer of railway or road in Nigeria is higher than in Kenya, South Africa and many other parts of the world, for example, which means Nigeria is not getting the right one. value for the amount of money borrowed to finance such projects.

Besides the bloated civil service, many civil servants prefer to protect their personal interests rather than those of the state, resulting in lost revenue for the government and the entire nation suffers.

Despite screams and cries from the president of FIRS about low income generation from taxation, Nigeria will remain at current levels until members of government recognize the need to put the country’s economy on the right track. and accelerate towards growth.

It is imperative that until the government is ready to develop national production structures, a diversified economy and export orientation, and provides a conducive macroeconomic environment, unemployment and productivity will continue to be a problem. major in the country while the payment of taxes by citizens would not magically improve.

The many so-called billionaires referred by the boss of the FIRS are over-indebted while many of them cannot really explain the sources of their wealth; it is therefore unreasonable to expect many of them to contribute positively to economic development.

It is not too late for the country to trace itself back and rebuild the broken wall, with real and sincere intention the government can recreate the type of economy that produced and attracted large manufacturing companies to the country in the 1970s. and 1980.

The environment needs to be turned around through reforms and policy initiatives that would ensure that investor confidence in the system is renewed as the government focuses more on regulations and reforms that create an enabling environment where businesses can thrive.

Pretending to support infrastructure development will not do the magic, but genuinely focusing on building infrastructure that would enhance economic development and not one that conforms to the religion and ethnic interests of members of government.

The government must be humble enough to learn from our small neighboring countries on what they are doing well to attract the type of foreign investment and lure Nigeria’s manufacturing companies to their shore.

Job creation through a public-private partnership would lead to economic recovery and provide a springboard for the country to leap forward in the league of countries currently creating opportunities for their young people. to take advantage of the global economy.

If the construction of a railway from Lagos to Onitsha and Aba, where major manufacturing takes place, will bring rapid economic development, so be it. Rather than borrowing money from Nigeria to build a rail line to Maradi, in the Republic of Niger, the government should first focus its efforts on building critical infrastructure where it is most needed to boost economic activities, then consider geopolitical spread to satisfy our diversity.

If the people are empowered, it would be easy to collect taxes and involve citizens in the development process, otherwise Nigeria will continue to grope in the dark of economic backwardness and tax revenues will remain low.

Mayowa is a Lagos-based financial analyst

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