One thing I must say for Fowler, the ex-boss at the Federal Inland Revenue Service – in spite of his many failings – is that he was partly a victim of general economic mismanagement and vision impairment from the top and centre. Nigeria shouldn’t have gone into a deep recession in 2016/7 but for the fact that something came over the president and he went into a deep slumber; a state in which he took all the wrong decisions or none at all, and disconnected from the people to whom he had sworn betterment. The mismanagement of the Naira is one case in point. So while treating himself abroad, President Buhari banned people who needed foreign currency for treating their own ailments abroad. He had almost all his children studying abroad while he rolled out these policies and asked people to pull their children from school if they cannot black market dollars. Naira slipped to N520 to the dollar. Businesses laid off staff, slashed salaries, or shut down entirely. Fowler’s FIRS suffered from these shutdowns, and Nigerians grew even more resistant to taxation of any sort. But he had his own bag of incompetencies. I believe he was a weak leader who allowed the boys around him to do whatever they liked. The stories we hear today are appalling. The jubilation that heralded Fowler’s removal was sad and unprecedented to my knowledge. I hear the disenchanted staff sang mocking songs as they shooed him out of the building while some smashed his pictures!
Let us leave Fowler. The little communication we have seen from Nami shows a more measured personality has taken over. He has inherited a very volatile situation and the usual default mode for most people will be an all-out witch-hunt. Fowler may have questions to answer at the EFCC but it is apparent from what we have seen that Nami is forward-looking, deploying simple statistics to inform FIRS staff of the problem at hand, where they missed the way, and rallying them for the challenges of the immediate future. That is quite commendable. The language in the memos we have seen in public, is calculated, professional, measured, tentative but reassuring.
And then there is the idea of setting a target of N17 trillion for the service in the year 2020, up from the N8.5 trillion that Fowler had in mind. I think the figure was simply doubled. That is a lot of work for the service staff, but they also know that they more they collect, the more gets shared to them as per the Act setting up the service, so they have an incentive to work harder. In my very few interactions with some staff of the FIRS, I had told them I believe they should up the ante and dream big in terms of collection. This is a country where boys spend N11 million in one night buying champagnes in nightclubs yet they refuse to pay a dime in taxes.
The 2020 Finance Act offers a good fillip for the FIRS to leverage upon, but also a great challenge. Nigerians I believe, should also reciprocate the good policies of government. If the government is offering businesses with turnover less than N25 million yearly a ‘get-out-of-jail free card’ by exempting them from company income taxes and VAT, that is a great offer. The FIRS should then focus on the big hitters with this finance bill on hand to show that government is only interested in seeing that businesses do well. Compliance should go up if the FIRS plays the game properly. There are also other revenue lines that the service can and should exploit. We have never done well in the collection of Capital Gains Taxes in Nigeria for example. People sell properties and pocket the money. We allow people register property companies which they use to obliterate the audit trail and get away with murder. Also, most transactions are going digital now, so by necessity, the FIRS should position to obtain taxes from online transactions. In Europe there is something called a Facebook tax, which is targeted at those companies who make so much money but only pay taxes in the US. We should target those of them based anywhere abroad, but making money from Nigerians.
The challenge of the Finance Act stems from the fact that out of the 41.5million Micro, Small and Medium companies in Nigeria, according to the SMEDAN, 99.5% of them are micro enterprises, whose turnovers may be less than N25 million. Many companies will also try and manipulate their turnovers to go below N25 million ($70,000) in order to escape taxes altogether. Where then will the FIRS meet its target? Granted the service may now focus more on companies with good turnover. I believe that the idea behind this incentive, is for small companies to be able to grow.
What about those luxury taxes that Mrs Okonjo-Iweala mouthed in the days she was trying to wriggle out of bad economic performance? Kemi Adeosun also spoke about them but nothing happened. We all know that the problem in Nigeria today is the need to close the income gap, no less. We still have a big push back from the elites of this country who should be coming together to give the less-privileged some consensus if they were wise. VP Osinbajo once spoke eloquently about ‘elite consensus’ but I doubt if he did anything cogent about it even as the Chairman of the National Economic Council. In Ghana, they since introduced a tax for SUVs. We also see people spending N11million in a single night at night clubs here. There is a big space for expanding the tax net here. Even our manufacturers and chambers of commerce could do better to cooperate with the government. For example, when we talk of excise duties on cigarettes and alcohol, they are the first to scream blue murder. Nigeria has the lowest excise duties on these ‘sin’ items in the world today. I am privy to the IMF report on our tax system done in 2017 and can say this for a fact. My long article on the Ghanaian tax system is also a reference material in my humble view. See that here https://www.proshareng.com/news/Global-Market-/Tough-Economic-Lessons-From-Ghana/45049.
So I wish Nami godspeed as he gains insight into what must be one of the murkiest politics in the Nigerian public sector space; FIRS. He is going to need a lot of luck not to derail.
I close by offering some advice to Nigerians as pertains to taxes. You see we cannot remain in that primitive mode of avoiding and evading taxes ad infinitum. We cannot continue to run from the taxman in an ignorant manner. For one, if you don’t make money at all, the taxman has no business with you. If you make money, the taxman is not about to collect everything you have made, but a statutory percentage after you may have backed out your expenses. Our tax laws in Nigeria, truth be told, is not too bad and indeed our FIRS is not as harsh as what I have personally seen elsewhere. Try the UK. Try Ghana. Try the efficiency of the US IRS. I think we have to get off the complaint bus at some point. Let us help our nation. It is all we have. With the new concessions being offered to help promote SMEs, I am glad. Companies who do turnovers that are taxable should secure the help of tax consultants to see how they can legally reduce their payouts. As for the valid concern that our taxes are misspent by government, the valid way to mount a protest against government, is to pay. Many who complain of this issue, pay nothing at all.