Nigeria’s tax collection agency has attributed the low level of tax compliance in the country and others developing countries to the failure of the social contract between taxpayers and the government.
According to the chairman of the Federal Inland Revenue Service (FIRS), Muhammad Nami. it is expected that if the citizens are committed to paying taxes, the government should be committed to using the taxes for the common good of all citizens.
Nami, who spoke at the launch of the Public Finance Database by the Nigeria Governors’ Forum (NGF) in Abuja, noted that when governments deploy tax revenues for the common good of the citizens, there is a concomitant increase in tax compliance by citizens who see the direct benefit of the taxes they pay.
He said taxpayers need to see what has been done with their money to be encouraged to continue to pay their obligations under the Social Contract they have with the government.
A statement issued by the special adviser to the chairman of the FIRS of media and communication, Johannes Oluwatobi Wojuola quoted Nami as saying that those in political leadership in the country had a duty to promote a tax-paying culture by relating projects and infrastructural developments executed by them to taxes paid by taxpayers.
“The low level of tax compliance in developing countries can be attributed to the failure of the social contract between the taxpayers and the government. It is expected that if the citizens are committed to paying taxes, the government should be committed to using the taxes for the common good of all citizens.
“Taxpayers need to see what has been done with their money to be encouraged to continue to pay their obligations under the Social Contract they have with the government.
“As tax administrators as there is a nexus between the effective utilization of tax revenue and tax compliance,” he stated.
The FIRS boss further argued that projects funded by taxpayers’ money should be reported as such and not personalized so that citizens would begin to relate these projects as the proceeds of their taxes.
“Those in political leadership should promote the tax-paying culture by relating projects and infrastructural developments executed by them to tax.
“The government at all levels are doing a lot with taxpayers’ money but citizens do not easily appreciate these facts because of the way and manner the projects are reported.
“There is the need to de-emphasize and de-personalize projects so that the citizens will begin to relate all the ongoing laudable projects in the states to tax revenue. This singular act to a great extent will increase the tax morale and enhance compliance.”
Muhammad Nami, an advocate for a harmonized tax system as a cure for tax revenue leakages used the platform to call for the country to make a bold paradigm shift by harmonizing the country’s tax system to optimize tax revenue collection.
“Recently, there has been a clamor for a holistic review of our tax system. Its proponents, including myself, argue that if Nigeria must achieve its tax revenue potential as the fulcrum of economic development, a harmonization of our tax system must be undertaken.
“Tax harmonization for enhanced revenue generation, which was the theme of the 2nd National Tax Dialogue was carefully chosen to reiterate the need for us as a nation to rethink the current tax system being operated.
“There was a consensus at the dialogue that Nigeria needs a transition to a unified tax administration as practiced globally by most of the efficient and effective tax jurisdictions that have achieved optimum tax revenue collection.
“Certainly, there is no gainsaying that if Nigeria must be less dependent on external borrowing and buffer from the volatility and dwindling oil revenue, there should be a paradigm shift. Beyond politics and sentiment, the country should be willing to make those bold and hard but beneficial tax reforms and there is no better time than now if we must avert the looming debt crisis. The gains from a harmonized tax system far outweigh the fears expressed in some quarters, if dispassionately analysed.”