ONLY IN OPENING THE BOOKS, ARE WE FAIR by Kolo Kenneth Kadiri
In December of 2015, the Nigerian government announced its interests in reviewing existing, and enacting new tax policies and legislations that will plug loopholes and enable it collect more to fund the national budget amidst an impending recession that was ignited by a global fall in oil prices. As an oil producing nation, Nigeria’s over dependence on oil proceeds means she has some of the lowest tax rates in West Africa if not Africa, which makes for ease for businesses to proliferate in an ecosystem buzzing with an ever increasing market.
Tax is the glue that builds accountability of governments to their citizens; and for many, tax is a complex topic, best left to ‘experts’. However, fair and effective tax collection is essential for raising the revenue to deliver services that citizens need. Engaging with tax policy is increasingly essential for the eradication of poverty and social exclusion; access to essential services; aid, debt or trade; governance and accountability or the impacts of mining. There are indeed, strong reasons for anyone to consider knowledge of tax justice.
To be fair, the technicalities of taxation, are better left to experts, but the models, policies and legislations that set tax machinery in to place, must concern everyone; none less, the poor, underprivileged, excluded and marginalized. Nigeria is a great example thus, where a country is hugely affected by taxation or the lack of it, and the polity are wont to be excluded from its discourse. This, has over the years fuelled illegal financial flows out of the country in to tax havens, enabled big corporations to lobby and bribe their way to receiving holidays and waivers, and impoverished large swaths of a country which in varying times have been dubbed “giant of Africa” or “Africa’s largest economy”.
With annual losses to only tax incentives estimated at $2.9bn as reported by ActionAid, Nigeria could be losing upwards of $10bn annually via tax dodging and evasion, tax misinvoicing, and transfer pricing amongst others. In March 2016, the media reported that Nigeria’s power output crumbled to 0MW and it persisted for another three hours, before it picked up. Results from multiple polls, reveal power and the lack of it, as a major factor that has hindered the country’s development. Yet, in April 2016, Minister for Works, Housing and Power – Babatunde Fashola – reiterated that there is a price Nigerians must pay for stable and sufficient power. Well, tariffs had been increased, yet, unending days of blackouts dot the country.
Recently, the Lagos State Government proposed a move to tax domestic staff and artisans (basically, the informal sector), in order to raise more in internally generated revenue. However, Nigeria lost at least $3.3bn through holidays granted to one consortium in the extractive industry in a period of ten years; and it required a separate law to back it up, despite an existing Industrial Development (Income Tax Relief) Act of 1971. The cheat, is that whereas the IDITRA provides for a maximum of five years in holidays, this consortium enjoyed holidays for ten years. So, while the middleclass and the poor gets taxed even tighter, big corporations continue to get waivers and incentives, even though tax holidays isn’t at the top of the list, for reasons why corporations decide to do business in Nigeria.
The burden we bear, are enormous. Tax dodging has impoverished the Niger Delta; and the conflict and pollution that stems from that region is closely linked. While tax holidays have not translated in to indigenous jobs, tax dodging has robbed the government of vital funds to provide social welfare, and investments in social entrepreneurship and development. On flip sides, the poor, marginalised, underprivileged and excluded are the losers.
Recently, while speaking with the Director for Customs and Duties at the Economic Community of West African States (ECOWAS), I raised the issues relating to base erosion profit shifting – tax planning strategies employed by big corporations that exploits gaps and mismatches in tax rules across tax jurisdictions, to artificially shift profits to low or non-tax jurisdictions, where there are little or no economic activity, resulting in little or no overall corporate tax being paid. While the Director – Salifou Tiemtore – reiterated the need for countries in the region to collect more in taxes, as well as the need to look towards country by country reporting (CbCr), a move which will end tax secrecy, and ensure corporations operating across countries in the region, open up their books. While he has given the assurances of ECOWAS to lobby governments of member states to assent to such policy where available, civil society organizations, researchers, analysts and citizens must now look to the West African Tax Administrators Forum, to provide the technical argument in favour of implementing BEPS CbCr.
While this will ensure tax transparency as its enforcement will ensure corporations only declare profits in countries where they so operate and make gains, this will also provide basis for governments to tax them right. It is not in paying taxes, that justice is served, but in paying fair share of taxes. And this, has been non-existent in Nigeria. These big corporations can afford to pay the best lawyers, accountants and bankers to find tax loopholes in legislations; but as an enlightened people, we can always pressure government and advocate for tighter laws that ensures everyone pay their fair share.