Oluwole Osagie-Jacobs
There is no doubt that one of the right steps this government has taken is the appointment of Alhaji Mohammed Nami, a thorough bred tax professional, as the Executive Chairman, Federal Inland Revenue Service, of Nigeria. One of the strictures against good performance of those holding public office in Nigeria is inappropriate appointment. This is worse in political dispensations where appointments are motivated by political considerations. Alh. Nami’s appointment is a departure from the norm. It is an indication that a divine spirit is at work. For those who don’t know him I am pleased to announce to you that he is a tax field Commanding Officer with many years of tax and accountancy practice behind him. Alh. Nami was baked in the crucible of Pannell Kerr Forster, a British firm renowned for accountancy and tax practice. His penchant for detail and accuracy is rarefied, and this will significantly enhance his performance. It is heartening that in his first few weeks in office he has instituted deep reforms that would reposition the Service for better service delivery. In addition, we must thank Mr. President for the ongoing tax reforms.
While appreciating the contributions of the Executive Chairman’s predecessors in office, we cannot run away from the fact that the FIRS, as it is today, is louder than it’s worth. We hear of humongous tax collection that is not benchmarked against potential. Annual increase in tax revenue is hailed and celebrated as if population and needs had remained static. It is not discounted with the rate of inflation, foreign exchange, cost of collection and the number of personnel involved in revenue collection. The world is moving on in a frantic pace and technology has sired electric cars which would, in few years, discount in a significant manner the value of our major source of income which is crude oil. Nigeria needs money to build critical infrastructure for a healthy economy. It is for this reason we need someone who would drive revenue collection with the zeal of a Jehovah’s Witness.
In the year 2019, Nigeria, South Africa, Egypt, Algeria, and Angola in that order were the largest economies in Africa, but in terms of Nominal GDP per capita, Nigeria was ranked 17th. In Asia, we have robust economies of countries called the Asian tigers. Africa can now boast of African leopards (African Amotekuns) in countries like Rwanda, Botswana and Ghana with economies charging forward with the agility of a leopard. Nigeria must move with the times or perish. You cannot hope to increase tax revenue in a country where manufacturing is dead or on life support.
The kernel of this article is to examine how Alh. Nami is going to supplant the mountain of challenges before him. It is common knowledge Nigerians resent tax and that they pay tax only when it is unavoidable. In 1983, Miss Price, a Briton and co lecturer with me in Port Harcourt, told some of our colleagues she was going to bank to remit her tax to Britain. This was to the amazement of many who thought she needed a medical attention. She had to explain to them that she had an obligation to contribute to sustain the good governance in her country. For good measure, she said, that was why things work in Britain.
Sometimes Nigerians reject things that would be to their benefit. Most Nigerians would not use the seat belt or adopt family planning unless they are compelled to do so. Is it such people you would tell they would derive benefit from paying tax? This passivism towards tax payment is accentuated by the poor and skewed reward system in the society due to bad governance.
Alh. Nami must grapple with the many intriguing complexities and ambiguities in tax legislation that makes tax administration and compliance very daunting. These can be gleaned from the following judicial pronouncements;
“No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer’s pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue”. Lord Clyde (1929)
“If a man were to make a systematic business of receiving stolen goods, and to do nothing else, and he hereby systematically carried on a business and made a profit of 2,000 pounds a year, the Income Tax Commissioners would be quite right in assessing him as if it were in fact his vocation” Partridge Vs Mallandaine, High Court of Justice (Queen’s Bench Division), 1885.
“It is, in my opinion, absurd to suppose that honest gains are charged to tax and dishonest gains escape. To hold otherwise would involve a plain breach of the rules of the statute, which require the full amount of the profits to be taxed and merely put a premium on dishonest trading. The burglar and the swindler, who carry on a trade or business for profit are as liable to tax as an honest business man, and, in addition they get their deserts elsewhere” Lord Morrison.
Lord Clyde had laid bare the distinction between tax avoidance and tax evasion in his highly celebrated judgment. Tax avoidance is not a crime. A tax payer can avoid tax by arranging his financial records in a way as to make him pay as little tax as possible. Tax evasion is a crime. This is illegal avoidance of tax by hiding taxable income or claiming unauthorized deductions. It is apparent that the war between the tax man and the tax payer is the one of wits.
Tax on dishonest gains is an indication that there is no morality in tax business. It is the tax evaders Alh. Nami should go after. In this era of voluntary tax compliance through self assessment he should go after tax defaulters. Thank God his first name is Mohammed, he should move to the mountain if the mountain refuses to move to him.
I attended the Pannell Kerr Forster training school in 1988 where I watched more than ten video clips on tax collection in Britain. A man who was apprehended by tax officers was taken aback by the detailed knowledge of the officers of his affairs. They knew he plays golf and had record of his annual subscription at the golf club. They knew he smokes and drinks. They knew the number of his children and his type of abode. Since he was not up to date with his tax returns he was given a Best of Judgment Assessment. In developed countries, it is difficult to be off the radar of the eagle eyes of the tax man.
To be concluded tomorrow
Osagie-Jacobs writes from Abuja via [email protected]