Of Rule of Law and Tax




I was in a session once where David Cameron (the former British Prime Minister) was asked if he were made an adviser to the Nigerian government what he would advise. At that time, he eulogized Nigeria and the intelligence of its people but did say that while he believed Nigerians could chart a way for themselves given what her nationals were doing in Britain and around the world, he had learnt a few things in government that he thinks he could share. He said he has learnt that governments really come down to two things, which are, the rule of law and taxes.

This sounded a little obvious and simple. I was expecting something really profound. If it is this simple why do we not get it right in Nigeria, I wondered? We seem to be both anti rule of law and hardly think we should pay taxes. Most governments do not spend creative amount of time to figure out how taxes ought to be collected effectively and inclusively. In fact, some government agencies contravene the rule of law to collect taxes. If peoples’ stake in companies is evident in their investment in those companies, is it not understandable that the interest of citizens in the Nigerian nation is helped by somewhat finding a way to include all in the collection of taxes? Nigeria is enigmatic.

In any case there has to be more coming from David Cameron on governance than these two factors (this was several years before the fantastically corrupt episode). Once I was returning to Nigeria from the United Kingdom feeling deeply concerned for Nigeria and our progress so far, I meandered through some of the narrower streets of London on my way to the airport noticing the several patches on the road I wondered, what is special about this place? All I could remember was Cameron’s statement the rule of law and taxes. If you know London well, you know that Londoners are not lacking in their awareness of these two musketeers, the rule of law and taxes. They have a system that works somewhat. Beat the traffic light; you get a fine in the post the next day that you must pay, which affects your car insurance premium and marks you out for being a dangerous driver. The system has got you hedged in.  Taxes? Those who evade taxes are in the minority. In fact, tax offenses have been used to fight corruption effectively as it is difficult to explain your tax return compared to your outlandish lifestyle (a lesson our state and federal governments could learn from in the fight against corruption). Taxes are also used to influence economic and social behaviors. You lower taxes for businesses you want to encourage and raise taxes for businesses you want to discourage. Back to my point, sometimes, profound thoughts are hidden in simple ideas. Shouldn’t we therefore just focus on these two pillars capable of guiding our country into a renaissance experience given their role in Great Britain? The idea remained in my meditation throughout the flight back to Lagos; an idea that is not complicated must be observed and understood also by an ordinary person on the street. At this time Lagos had started showing great promise presenting as the premium example that certainly, change was possible within our borders once we had leaders who were not challenged by talent, a theme that the respective governors of Lagos state from Tinubu through Fashola and now Ambode have all demonstrated.

As soon as I landed and exited the Murtala Mohammed International airport, I quickly took a taxi home in the absence of a pick up. As we drove out of the airport I realized I could pick the mind of the taxi driver and test David Cameron’s hypothesis. How na? I asked the driver and how Lagos state government dey perform? He responded quite immediately and said the government dey try well well (double for emphasis) na only say the law don plenty for Lagos and dem dey charge us money too much. In plain English, I was asking how the leadership of Lagos was doing? His response, which sounded like he was at the meeting with Cameron, was in summary, the government is doing very well, and the only issue is that the rule of law has become more effective and pronounced together with increased taxes. These were the days when LASTMA (Lagos State Transport Management agency) was more effective and respected more than the police in Lagos for controlling traffic and KAI (Kick against Indiscipline) held sway. Who says state police cannot work. One thing that beats me in those days was the incentive system Lagos state deployed that ensured the LASTMA officer will most times not take a bribe on the road and let you go, you must get to the office and pay the prescribed fine—this made them quite dreaded in some cases and respected in other cases (they were not without high handedness like most agencies of government today anyway). Cameron appears right. The rule of law and taxes were working improvements in Lagos.

I like a definition given for taxes at the event of the Platform organized recently in Abuja by Covenant Christian center. One of the speakers defined taxes as government’s participation in the prosperity of its people. Another way to put it is that taxes are governments’ share in the prosperity of its people. If we follow this definition closely it suggests that governments ought to be interested in the prosperity of her citizens and that of the companies within her territory because therein is their own share of income. They should be organized around providing civil service (as their name suggests) to facilitate rather than frustrate business within the country. Because the lifeline of the nation depends on the success of businesses operating there, governments ought to set service performance goals, improve the ease of doing business and general sustainability of business practices. Performance or lack of it should then have consequences to demonstrate focus and seriousness on the part of government. This is not the case; I hardly see service quality questionnaires being requested from businesses and citizens who ought to be the recipient of services from agencies of government. Also, when you get a job with the civil service, except for fraud, people are hardly asked on the basis of poor performance to leave the service. Unfortunately over 70% of the Revenue of the government comes to it not from its effort in delivering services through taxes but in its role as a crude oil trader, a role it shares with its citizen in competition.

Who should the government serve in this case? Its competitors, who happen to be its citizens? The government is so conflicted as a player that it is unable to protect effectively the environment being a major participant in the operation that pollutes it in the first place. Also giving guidelines that allow sustainability of business activities and growth does not really look attractive because it will be scored very low in it, so it looks the other way. Why should the government be interested in other businesses which it does not own, where taxes is all they can get from them like most developed governments of the world? Why should they discourage monopolistic behaviors when by their power they can easily make themselves monopolies, it is easier to manage one monopoly in a sector than to allow many similar businesses thrive. The business of government is one; Oil export. Improving the ease of doing business is an unnecessary trouble. Pumping oil and transporting it to the Bonny or Forcados export terminals does not require an efficient Apapa, Tincan ports, or any of our airports. In fulfilling their objective as a crude oil trader, there is no need to expand our rail system and network. The monies will come anyway, the governors will go collect their checks every month in Abuja, the only investment required of them is in getting to Abuja quickly so they invest in private jets to achieve that objective. In doing so we have left a lot of income on the table and run aground even the business we own as a nation.

I suggest that we should focus our government on taxes and stop competing with citizens for profits. This whole concept of national assets is deceptive and only serves as a platform for rent seeking and plundering. The government is for the people, let the people be allowed to run businesses in the country separate from the government and pay taxes. Only people who are too lazy to be productive keep avoiding the challenge to run or manage enterprise in a competitive market. I am sure some people would like government to run farms, airlines, power companies, bus companies, etc. That way those who win election have more appointments to give their supporters. Do we have any track record of the Nigerian government running enterprise well? Even if we have, can government regulate itself as a player? Even if they can, is there possibly no conflict of interest if the regulator who should bring balance, discipline and effectiveness on all players is also a player? Will the regulator not regulate in favor of its own enterprise, putting citizens participating in the same market at a disadvantage? Can one effectively regulate oneself? How does the department of petroleum resources regulate the NNPC or shut down NNPC stations for infringements? Focusing on taxes as the only source of government revenue and its share of the prosperity of its citizen ensures congruence of objective between the citizen and their government; it is in the prosperity of the citizen that the government prospers through taxes.

Focusing on taxes is also the way to effectively implement the rule of law, using the rule of law to engender a business climate conducive for business without being primarily the regulator has its advantage. When government as a player breaches its own rules as it sometimes does, chaos is the result given the effect of precedence. It is for this reason we need to focus on strengthening our institutions like the police, EFCC the judiciary etc. Lets think about it for a moment, and I will use a remix of an interesting quote by Adams Oshiomole, which remain true today, varying it for my purposes. “If corruption is big then it is big business. If it is big business, then it is visible. If it is visible how many have our agencies brought to conviction? If only few are being convicted, would it not be right to say they are either lacking in capacity, competence or worse still conniving with culprits?” One of the things that beats me is our sense of performance, responsibility and their management. If we say corruption is rife in Nigeria shouldn’t we ask who is supposed to be responsible for making it difficult to thrive? Is it not an indication that the institutions saddled with this all-important responsibility failed in their roles? I see not a lot of effort targeted at major reforms in these institutions. I rather observe that we use the same structure and people who accommodated corruption and allowed the rule of law to be weakened in the first place to prosecute the fight against what they were unable to fight in previous governments. Let me give an example, it is impossible to rig an election without the active or passive support of the police assigned to the location. When it is shown that the election was truly rigged or there was widespread violence what consequent action is taken against the security personnel assigned to the location? I have not seen any yet, despite widespread irregularities and clear tampering with election materials under their watch in the past. Sometimes a more strategic posting may even be given the responsible officer, meaning well done for a good job.

I believe if the rule of law, which is the second pillar for development, needs to be effective, then the real fight against corruption should be targeted at reforms in the institution that failed in the first place to push back the vices we now fight. Certainly the president appears resolved to stamp out corruption but he can do so only as a strong man as long as he is president. Without institutions, when the strong man leaves office at most after eight years, we will still be left with weak institutions making us look like the sacrifices and body language of the president did not put corruption sustainably face down. If the same police that allowed corruption and crime to multiply changed direction temporarily as a result of the body language of the president, and that change was not the result of deep structural and psychological reforms program (including reward systems and equipment availability), the same people will revert back to their old self once the body that had the language leaves office. We need to take a second look at them, strengthen their capacities and let the rule of law live in our midst. Great governments show their mettle in the way they succeed with taxes and the rule of law.

  • Mr.  Egube is the  Chairman Altassist Ltd.