National Service in an age of insecurity

IN the January 9 edition of this column, I discussed taxation, the new tax laws and the well-being of our country and our people in so far as taxation is concerned. Writing under the headline Government, Nigerians and Taxation, I surmised that a huge chunk of our people will remain outside the tax net and that tax avoidance and tax evasion may be on the increase.

I wrote, inter alia: “It would seem that not much thought, by way of intendment of the tax laws, has been given to widening the tax net. As we speak, millions of Nigerians will remain outside the tax net simply because they have structured their economic activities to run independently of the formal system that can be monitored by the tax authorities.”

Yesterday, my fears were confirmed when Zacch Adedeji, Chairman of the Nigerian Revenue Service said in a conversation with a competing publication that “we have no provision to tax informal economy.” By “we”, I suppose he means the Revenue Service he heads, and by extension, the Federal Government. Let me quote him:

“On the informal sector, you cannot tax what is informal. That is why they are called informal. To tax them, you must first formalise them. Encourage them to register and grow. Once they are formal, they fall into proper categories and can be taxed accordingly.”

Adedeji is wrong, and his stance betrays a lack of understanding of the nature, culture, and operations of various business activities in the informal sector. Let me use one example: The woman who sells pepper and tomatoes at a road junction in a suburb is not going to formalise in any way. Her operations are simple — go to the market with a specified amount of money, buy what she wants to sell, haul them back to her stall at the roadside junction, and begin to sell. The difference between what she paid for her wares and what she sold them for, obviously after a mark-up, is her profit.

This profit is immediately disbursed towards the purchase of items for daily sustenance, while a predetermined part of it is handed over to the alajo — the thrift collector who makes his/her rounds of many traders and artisans. Many traders like these, who keep their heads properly screwed at the right angles to their necks grow, and  very well too, owning houses and purchasing motor vehicles. They will not formalise because there is nothing to formalise in the purchase of tomato, pepper and onions from farmers for re-selling to consumers at a mark-up. The same thing happens with other kinds of traders. The artisans are also not left out — from when they get money from their clients to render a service, the difference at the end of the day goes immediately towards life sustenance, not to bank accounts. In any case, the tax laws do not have provisions to tax balances in bank accounts, so they are free even if they deposit money in the bank.

And that is where I take the position that both Adedeji and Taiwo Oyedele of the Presidential Task Force on Task Reforms still have a lot of work to do as it concerns widening the tax net. The peoples of Nigeria are a curious bunch; millions of countrymen and women are into activities that generate huge revenue but cannot be formalised. How do you ask a babalawo to formalise his operations? How will the alfa, sitting on his prayer mat, stringing his prayer beads formalise? Yet, they earn money from what they do! And the pastor? The Mullah? Or the adherents of other traditional faiths? How will they formalise? If Adedeji is waiting for them to formalise, he will have to wait for ever.

The challenge he has, and by extension, the president that appointed him and others is to put on his thinking cap and devise ways and means of getting people in the informal sector to pay tax. It was done in the pre and immediate post-colonial era. People paid taxes. My late father started his career in the public service as a revenue collector. Then, the various regions that made up Nigeria charged an amount per head that varied from one region to another. In the Western Region, which later became Western State, before becoming Ogun Oyo, Lagos, Ondo, Ekiti and Osun states, a flat rate of five shillings per head of taxable adult was levied. You needed licenses to ride a bicycle then, and it was ten shillings. The president, Adedeji and Oyedele may do well to revisit the tax matrix woven by the government of the Western Region headed by the late Chief Obafemi Awolowo.

In the interest of justice and equity, it is very important that ways be found to bring people in the informal sector to the tax table. Available data from NBS says that 92.7% of Nigeria’s working population, her labour force, which numbers somewhere around 116 million, works in the informal sector. What this means is that tax authorities have a paltry 7.3% of 116 million people in the formal sector to generate taxation revenue from. That is just 8,468,000. It is unfair to have less than nine million people carry 107,532,000 people on their backs.

Those backs would break! If we go by Adedeji’s book, there is a task to get more than 100 million people to formalise their operations and grow so that they can fall into taxable categories. The PAYE system, introduced in Nigeria in 1961, along with over-reliance on petro-dollars are the culprits here. If phenomenal development witnessed in the defunct Western Region was financed mainly through revenue from taxation and agriculture, in the 1950s, it can be done now, and better too. Just for the players to put on their thinking caps, love the people, go to work and make life better. And they can do this if they choose to. Abi? TGIF.

The post National Service in an age of insecurity appeared first on Vanguard News.