The Associate professor of Management and Finance at Baze University, Abuja, Dele Olaolu says states will benefit more from the proposed change envisaged from tax reforms. Prof. Olaolu, in this interview with BENJAMIN UMUTEME, noted that when the Presidential Committee on fiscal policy and tax reform completes its work, more Nigerians will be willing to pay tax.
The Presidential Committee on Fiscal Policy and Tax Reform has been constituted by President Bola Tinubu, do you see it changing Nigeria’s tax landscape?
What the Presidential Committee on fiscal policy and tax reform wants to do is to completely downsize the number of taxes that we have with the objective of having more money come in. We have multiple taxation both at the federal, state and local government levels, and because they are multiple in nature they tend to conflict with each other. You will discover that people pay at the federal level, when they get to the state, they pay the same thing, and at the local government level they pay the same thing. For example the advertorial tax, you pay at the federal level and when you travel to the state they ask you to pay, and at the local government level, they tell you that you are not from Niger Delta, they ask you to pay again. People feel that multiple taxation is exploitative so they don’t pay but the committee is saying let us down size, and they are looking to bring it down from about 65 that they have now to between 9-10. If we have 10 and with the receptivity of people to want to pay more, most likely, you will see people pay more.
What do you see as the central theme of the committee’s work?
What the committee is working on is the willingness or incentive for people to want to pay. And if people willingly come forward to pay a tax then we are going to have more than the situation we have now where people are still forced, in fact, it is coercion! And one of the tax principles is the ability to pay, easy to pay, willingness to pay. What we have now, they don’t make it easy for people to pay. If this committee works with the mandate the federal government has given them, then, we are going to have a sizable reduction, almost 90 per cent of the multiple taxation will come down and we have more people to pay. I think that will help the economy.
What do you see as likely challenges that may come-up at the end of the day?
The institution to collect taxes will be another challenge. Before we had so many, for example, Customs collect excise duties, and the committee is saying Customs is to man the borders, you can’t ask Customs to be collecting taxes; it’s not their competence at all. We’ve seen leakages. They will arrest people for bringing in contraband goods and because of what we know; they will just let them go. Most likely, what they will collect will equally be streamlined. For example, the Customs and excise duties may likely be ceded to FIRS. And I think they might likely change their name as well to make it national in nature. Most likely, if FIRS can collect most of the taxes with the introduction of transparency and accountability, states will have more benefit because what they collect will be bigger at the top and by the time they cascade it down through the monthly allocation it will be more. Currently, I think what they shared was almost N1 trillion, over N950 billion, and it’s increasing since the president came and it’s been increasing. This current month most likely, we are going to hit the N1 trillion marks. So, the more we collect, the more the states will benefit. I think the fear before was that they will not get their share if they don’t introduce their own taxes. It’s just about trust and being accountable, it will change the narrative. I think they want to give them more power to collect the tax at the federal level. By the time you have 65 reduced to 10, who are you going to give it to? I read last week that at a particular garage, an ‘Okada man’ collects 6 tickets a day. How much does an ‘Okada man’ make, yet they collect 6 tickets in a day. If you go to Lagos, most of those Danfo you see pay more than 5 times even in Abuja here, you see them fighting. Some drivers will just be so tired and resort to fisticuffs. That is why they fight their life to become the chairman because they know it’s so juicy, the money is there. So, the president is saying I don’t want to tax the public and with the economic situation in Nigeria, you and I belong to the vulnerable sector, even with our level. You can imagine somebody who doesn’t have a job, somebody who is a student, somebody who is selling one small thing at the market. So, when they downscale the tax heads and they are able to bring it to just 10, you won’t see those informal sectors being taxed and that would free a whole lot of people. Let me pay my tax, I am working, my tax should cover me and my family. Why go to that poor woman, or to my daughter in school for her to pay for one thing or the other, I think it alludes to transparency. If the government can be transparent particularly in restructuring the institutions that collect taxes in Nigeria it will make it more efficient and rewarding.
Do the FIRS have the capacity to collect taxes nationwide, if the role is eventually ceded to them based on the recommendation of the committee?
Am sure they are going to reform the tax act as well from what I have read. They will go to the National Assembly to reform the tax act because what we have currently cannot work. Some of the tax we have now dates back to the 1950s and the military regime. Most likely in terms of capacity and even transparency we are going to see changes because we know too that even at the FIRS there are leakages. I know the president based on his experience in Lagos may likely bring IT and I know FIRS is driven by ICT, but there may be some higher version of ICT that they will add to it. If they can make it pure electronic, pure e-tax collection without any cash intermediation, I think it will work out. And in terms of capacity, the next question we are going to ask is that the companies that collect those taxes are going to merge them, will FIRS onboard their staff? We have to look at that aspect. If those agencies that collect tax before have some people working, it’s equally a source of employment. By the time you collapse them, are you going to ask FIRS to absorb them? We may discover that an agency has 200 staff that collect these taxes and you ask them not to collect again, are you going to close the agency because they don’t collect taxes anymore, what happens to those 200 people? Those are the issues we are going to face but I am sure that will be addressed. We should equally be sensitive about the employment side of it because FIRS will now be the controlling body just like we have the coordinating minister of the economy. If FIRS is restructured-because I know there are plans to change the name to Nigeria revenue service-maybe it will now have more national outlook and then, it will be expanded. For port reforms alone, port collection of taxes, I know they have more than one thousand staff because of the size of our ports. What if you now disenfranchise ports from collecting taxes, customs and excise duties, what happens to those staff? Except they now ask customs to absolve them, I believe that when they change the name they will expand it, I believe that the enabling act or the amendment of the act may likely have a proviso that they should absolve those people with a good legislation backing it up. It’s a win-win for everybody. Am excited that our tax head will be reduced from 65 to 10, it’s going to be a big one; people will have the willingness to pay. Overseas, people are happy to pay taxes because they know it works. You don’t need to go anywhere; everything is just working for you. So, once we see what they do with it, I want to pay more.
What is your thought on the appointment of a new chairman for the FIRS?
I think the new chairman will bring new energy into our regulatory tax Institution thereby enhancing the country’s tax revenue collections. He will surely provide new vision, leadership & overall direction for enhanced performance based on his established track records & performance. His appointment will also serve as fresh motivation for the entire FIRS workforce as he will provide new direction & revised strategy in the new way of doing things in the institution. Zach Adedeji comes with deep wealth of experience as former Commissioner for Finance, Oyo State where he pioneered many novel tax policies and enhanced the state tax collection … Also, as former Special Adviser to the President on revenue, who served as coordinator and mid-wifed the new Presidential Committee on Tax Reforms & Fiscal Policy, there will be a good understanding and handshake between FIRS and the new committee for seamless transition and implementation of the new tax policy to be introduced by the Oyedele led committee. Overall, I think FIRS as an institution and the country as a whole will benefit greatly from his new leadership leading to enhanced tax revenue collection.