Being A Key Note Address By The Former Minister Of Finance, Mrs. Nenadi Usman during A Workshop On Multiple Taxation
I am delighted to be invited as the special guest of honour at this very important event. The uniqueness of this workshop is that it is aimed at an issue which is much talked about but much remains to be done about it.
I must use this opportunity to commend the British Council for their interest in the progress of the Nigerian economy by their commissioning of the Nigerian Economic Summit Group to carry out this study in multiple Taxation in Nigeria. This is a worthy step taken towards finding a lasting solution to this menace which the present administration is committed to eradicating, because of its negative impact, not only on the business environment but on the economy at large.
Introduction
Ladies and Gentlemen, taxation is not always a pleasant topic for discussion and if we all have our way, no one will pay any tax. However, for any government to have the required resources to put in place and run the projects and programmes that will enhance the quality of life of its citizens, taxes have to be levied on all taxable persons; individuals and corporate. Taxation can also be an effective tool the Government uses to control time consumption of certain goods and services that are not seen to be essential and beneficial to the well-being of its people. In essence taxation is a means to a worthy end inspite of its “pain” on those who bear the burden.
However, while Taxation is important for providing the much needed government revenue, this administration knows that taxation becomes counter productive when it is excessive. This is what the administration is trying to address.
Notwithstanding the various tax reform initiatives taken by this administration in the last two (2) years and the attendant improvements in the tax administration in Nigeria, the fact that taxable persons are being subjected to all kinds of taxes and levies by Governments and their agencies at the Local, State and Federal levels, blurs whatever achievements that may have been recorded to date.
What is Multiple Taxation?
Essentially Multiple Taxation arises when a Taxable person or taxable transaction involving goods and services within the same economy, are subjected to the same kind of tax more than once. This definition not withstanding, multiple taxation has been used to describe the various additional phenomena:
- Road blocks by illegal “tax” collectors who operating under various guises, as the movies collected go direct to the pockets of individuals.
- Charges for State/Local Governments that are done in return for services offered that are peculiar to the State or Local Government, for example, charges for land, for rented masts of telecomm operators.
- The different kinds of taxes, duties, fees and charges imposed on a person or company in the Federal State and Local Government even when such taxes, duties, fees and charges are for different services offered. I remember that at one of the Joint Tax Board Meetings, an attempt was made to list out the different sources of revenue for State/Local Governments in the types of taxes/fees/charges chargeable and it came to about 47 in number!
An analysis of the revenues accruing to the State and Local Government, showed that on the average (with the exception of Lagos and a few other States), 90% of the revenues accrued from the Federation account and the balance was generated largely from Personal Income Tax.
Understandably in Nigeria today, there is huge cry against the multiplicity of taxes imposed on the business community by various organizations at the Federal, State and Local Government level.
Why Does Multiple Taxation Occur?
The multiplicity of Taxes and levies in Nigeria can be traced to the following:
i. The multiple layers of Tax Jurisdiction in Nigeria as the law gives various taxing powers to Federal, State and Local Governments. Each level of Government therefore has it’s own revenue authorities and other agencies and develops its peculiar revenue generation strategies.
ii. The low level of coordination of tax administration between these revenue authorities across the country.
iii. The drive by Governments especially at the State and Local Government level to increase their internally generated revenue and an excessive focus on taxes and levies as the only means of bringing in more money into their coffers. This is done with little or no consideration of the adverse effects on the taxpayer and the economy at large
iv. The Corruption and “419” menace which have penetrated all aspects of economic activity.
v. The low level of trust and feeling of powerlessness in the system which prevents., the taxpayer from taking legal action, working with law enforcement agencies, tenaciously resisting fraudulent operators or seeking refund from tax authorities where the same tax is charged more than once.
Who Suffers Multiple Taxation?
The excessive burden of the myriad of taxes and levies imposed by Government organizations all over Nigeria is largely borne by taxable persons who play an important role in boosting the Nigerian economy. These include:
- Distributors and Traders involved in interstate buying, selling and movement of goods e.g. tomatoes, onions, beans, fruits, poultry products and livestock (cattle, goats, etc.)
- Financial institutions e.g. Banks with branches scattered all over the country, who are forced to pay various levies for each branch.
Telecommunication operators e.g. MTN, Globacom etc.
Oil and Gas producing and Services companies and those involved with petroleum products marketing and ultimately ‘of course, the costs of multiple taxation are borne by each and every one of us the consumer.
Adverse Effects of Multiple Taxation
It reduces the profitability of many businesses
It leads to a disincentive not only for new investment but also discourage further reinvestment in many sectors of the economy.
It is a major factor behind the inflation and high market prices of many consumer food and manufactured products.
The means used to impose these levies-road blocks, sealing of business premises etc. constitute a nuisance to economic activity and gives the country a bad image.
It ultimately encourages the taxpayer to device ways of non-compliance to tax laws (tax evasion and avoidance). The issue of level of tax compliance is a major challenge to the success of current tax reforms initiatives.
Countering Multiple Taxation: Initiatives by Government:
Some steps below have been taken to address the menace of multiple taxation:
Legislative Initiatives: These involve steps taken by the Government to provide legal provisions that will further discourage multiple taxation. These include the following:
a. The enactment of the Taxes and Levies (Approved List for Collection) Act No. 21 of 1998, which has became the major legislation against multiple taxation practice as it:
i. Bans the use of roads blocks for revenue collection purposes (section 3(a)).
ii. Stipulates sanctions for offenders (section 3)
b. The enactment of the F IRS Bill to create an autonomous and modern tax authority.
c. Three (3) of the eight. (8) Tax bills being considered by the National Assembly at present are designed to curb multiple taxation at the Federal level. These tax bills are:
i. A Bill for an Act to amend the Customs, Excess Tariffs etc. (Consolidation) Act to abolish the 5% levy on Cost, Insurance and Freight (CIF) value of imported sugar.
ii. A Bill for an Act to amend the National Sugar Development Council Act to abolish the 10% surcharge on sugar imports.
iii. A Bill for an Act to amend the National Automotive Council Act to abolish the 2% levy on the Cost, Insurance and Freight (CIF) value of all imported fully Built Units (FBU) and auto components spares parts and completely knocked Down CKD parts.
d. In addition to these bills, the Federal Government has directed that once the bills are passed, other similar administrative levies should be discovered and aborted; in addition, new bills imposing new taxes such as the planned tax for the Police should be discontinued.
e. Attempts were made to centralize tax collection within one body, but this was deferred to a later stage after the ongoing reforms would have been concluded; the State authorities in particular did not trust the Federal Government motives in suggesting central collection machinery. With time this is an issue that must be addressed to enhance the simplicity and efficiency of the tax system as it remains’’the ultimate solution.
Solicitations to the State Governors
A. The Joint Tax Board which made up of the Tax Authorities of Federal and State Governments has commenced a series of visits to the State Governors to sensitize them of their role in eliminating multiple taxation. In this regard, the Joint Tax Board is soliciting the support of the State Governors to
I. Create autonomous and modern tax authorities at the State level.
ii. Ensure proper implementation of the Personal Income Tax Act.
iii. Work with Local Governments to streamline taxes and ensure a simpler and more effective tax regime.
iv. Work with Law Enforcement Agencies to remove illegal tax collectors..
v. Avoid the use of tax collection machinery as a means of rewarding political friends or oiling the political machinery as it just helps to subvert tie system and development as a whole.
Public Awareness Campaigns:
a. The Joint Tax Board in several of its communiques has clearly communicated dissatisfaction with multiple taxation and has urged tax payers to report all incidences of such practices. It has also sought to educate the public on the reality that we have existing legislation to prevent this menace emphasizing that the challenge lies in implementation and not necessarily in legislation unless it has to do with laws that would further enable implementation. For example, the 2nd Schedule, Part II of the Nigerian Constitution is very explicit in this regard and states interalia:
i. Para (7) In the exercise of its powers to impose tax or duty on a) Capital Gains, Income or Profit of persons other than Companies; and b) documents or transactions by way of stamp duties, the National Assembly may, subject to such conditions as it may prescribe, provide that the collection of any such tax or duty or the administration of the law imposing it shall be carried out by the Government of State or other Authority of a State.
Para (8) where an act of the National Assembly provides for the collection of tax or duty on Capital Gains Tax, Income or profits or the administration of any law by an authority of a State in accordance with para 7 hereof it shall regulate the liability of persons to such tax or duty in such manner as to ensure that such tax or duty tax, fee or rate is not levied on the same person in respect of the same liability by more than one Local Government Council.
B. In addition, tax authorities are encouraged to regularly educate taxpayers on their rights and responsibilities by way of publications and advertorials in print and electronic media, with a view to providing guidelines to help them resist attempts to impose illegal levies on their business operations.
4. Action Against Illegal Revenue Collectors:
A. The Joint Tax Board continues to challenge a number of organizations which have been fingered to be behind multiplicity of taxes and levies in Nigeria. These include Joint Revenue Association (JORA) and Joint Accelerators Association (JASS) and Mobile Adverts Association of Nigeria.
The Joint Tax Board has also taken the following steps to tackle their illegal revenue collection activities:
i. Made a request to the Economic and Financial Crimes Commission (EFCC) to initiate investigation into the activities of these organizations, which clearly tends towards economic sabotage.
ii. Initiated action at the Corporate Affairs Commission (CAC) to deregister such organizations for engaging in revenue collection activities not stated in the Memorandum and Articles of Association.
iii. Currently the JTB is engaged in a law suit initiated by the Joint Accelerators Association (JASS) who claim they are seeking redress against the JTB for the actions it has taken to curb their illegal revenue activities.
Multiple Taxation: Next Steps
Although, much efforts seems to have gone into tackling multiple taxation in Nigeria, the problem though
reduced, continues to persist. The taxpayer continues to complain about illegal road blocks mounted on State and Federal highways for revenue collection purpose; businesses continue to contend with new levies imposed by States and Local Government and their appointed agents.
Consequently, there is a need to review our strategy and take more decisive steps to arrest the issue of multiplicity of taxes and levies, which continue to pose a challenge to tax reforms efforts and is fast becoming a national problem facing the business community in Nigeria.
Clearly to tackle this problem, all stakeholders must be involved collectively in pursuit of this objective.
To tackle the menace of Multiple Taxation the Federal Government sees the need for all stakeholders to take the following steps:
Financial Impact analysis. of the huge damage done to the economy by acts of officials and appointed, agents of tax authorities that exacerbate the problem of multiple taxation.
State Revenue Authorities, with strong law enforcement powers.
Ensure a stronger level of collaboration between and amongst Taxpayers, Tax Authorities and Law enforcement agencies tos arrest any persons (government officials or private organizations) found engaged in illegal tax activities e.g. mounting road blocks on State/Federal. Highways for revenue collection purposes, as this is an act that runs foul of the law.
State Governors should make regular strong worded pronouncements against such practices (e.g. illegal road blocks) that compounds the problem of multiple taxation.
State and Local Governments should discontinue the use of the services of all private organizations in revenue assessment and collection. Instead, the existing Tax Authorities at the State and Local Government levels charged with revenue matters should he strengthened and better funded for improved efficiency.
All States should put in place a functional Joint State Revenue Committee as required by section 92 of the Personal income and recommend tax Act. CAP P8, Laws of the Federation of Nigeria. The JSRC must take steps to investigate all complaints against excessive and illegal tax activities of State and Local Governments bodies and recommend redress for the taxpayers.
There is a need for State/Local Government to shift for their focus away from levies and taxes as the only source of funds for Government programmes and projects. Other sources of income should be explored e.g. investment in revenue yielding projects in agriculture, solid minerals etc.
ß The list of all taxes, fees, duties and all charges by the Federal, State and Local Governments should be regularly published at least once a year; in all these Government is to have a sense of responsibility to its people to avoid abuse of the tax system.
The Revenue Mobilization Allocation and Fiscal Commission (RMA&FC) to consider and device a means of sanctioning States and Local Governments who have been confirmed to be engaged in multiple taxation activities: Since multiple taxation adversely affects the mobilization of revenue,
financial sanctions deductible from the monthly allocation of such erring States and Local Government can be imposed. This kind of sanction will be quite effective in discouraging the current tendency for States and Local Government to engage in excessive taxation of taxable persons within their jurisdiction.
ß There is an urgent need for an early passage of the eight (8) Tax Bills currently before the National Assembly, as these Bills contain provisions that provide some of the legal basis needed for initiatives to reduce or eradicate the incidence of multiplicity of taxes in Nigeria.
There is a need for Taxable persons in Nigeria (individual and corporate) to begin to offer adequate
resistance against illegal taxes and levies imposed on them by way of: refusal to pay such illegal levies and taxes especially at road blocks.
- readiness to challenge such illegal tax
- report to the law enforcement agencies (including the EFCC) with evidence of such illegal levies.
Civil Society should make all of the above happen and hold government accountable.
Ladies and Gentlemen, the challenge of multiple taxation can be tackled when each of us who are stakeholders remain resolute and committed to ensuring that those who intend to use taxation as a means to achieving their own selfish ends, are not allowed to continue to have a field day.
it is my hope that the deliberations and conclusions drawn from this Workshop will lead to the development of effective strategies to eradicate the problem of multiplicity taxes in the Nigeria Tax system.
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