Ifueko Omoigui-Okauru

The huge decline in crude oil prices, unfavourable future price forecasts, and their great toll on the economy, obviously, make diversification of revenue sources a matter of utmost urgency for governments in the country. Yet, Minister of Finance Kemi Adeosun, in a shocking revelation recently, said only 214 Nigerians, out of a population of about 180 million, paid taxes of N20 million or more. To reverse the trend and maximise tax revenue, former Chairman of the Federal Inland Revenue Service and Chairman of Lagos State Employment Trust Fund, Mrs. Ifueko Omoigui-Okauru, says Nigeria must move away from a collection mind-set and manual tax processes, which leave room for inefficiency and leakages, and embrace automated procedures that integrate all tiers of government, with an eye to long term economic benefits. Omoigui-Okauru speaks with Vincent Obia. Excerpts:

The huge decline in crude oil prices, unfavourable future price forecasts, and their great toll on the economy, obviously, make diversification of revenue sources a matter of utmost urgency for governments in the country. Yet, Minister of Finance Kemi Adeosun, in a shocking revelation recently, said only 214 Nigerians, out of a population of about 180 million, paid taxes of N20 million or more. To reverse the trend and maximise tax revenue, former Chairman of the Federal Inland Revenue Service and Chairman of Lagos State Employment Trust Fund, Mrs. Ifueko Omoigui-Okauru, says Nigeria must move away from a collection mind-set and manual tax processes, which leave room for inefficiency and leakages, and embrace automated procedures that integrate all tiers of government, with an eye to long term economic benefits. Omoigui-Okauru speaks with Vincent Obia. Excerpts:

 

Minister of Finance, Kemi Adeosun, stated recently that research showed only 214 Nigerians, out of a population of nearly 180 million, paid taxes of N20 million or above, despite the myriad millionaires and billionaires in the country.  Why are Nigerians not paying tax? Why do Nigerians not like to pay tax? 

I would like to ask one question before answering. How many people should have been paying tax? What percentage of those who should be paying constitutes 214? I don’t know if the Ministry of Finance addressed that, because it would be nice to know. I don’t have those facts, so whatever we are going to say is just general. But if you do a random sampling of 10 or 30 people, you probably would find that in that mix very few want to pay tax. But that is normal in any country or economy. I don’t think people willingly pay tax. But they pay tax only if, for example, they see the value of the tax they pay. I recall, when I was in office, one Scandinavian country, where even though your tax was supposed to be like 50 per cent, some people would even pay 80 per cent. What is the reason? They are making a lot of money, they don’t need to pay for education, they don’t need to pay for healthcare. At the end of the day, they have such spare cash that they feel, what am I doing with all this money, I might as well contribute more to the government so it can do more for the public. So in that sense, if we go back to the question, why are people not paying, or why do people not like paying? I believe most people don’t like paying unless they see that there is a reason to pay.

 

Nigeria does not have a robust tax base from where it can effectively demand tax. What do you think is responsible for the seeming lacklustre attitude of government towards the maximisation of tax revenue?

 I don’t know whether it is really an issue of government not exploring ways of increasing tax revenue. I think recognition of the need to do that is there at the federal, state, and local governments because they feel that they need more revenue to survive. What I suspect may be a little bit of a gap is that there is a disconnect between wanting more revenue and knowing what to do to raise revenue.  You rightly said that you need a strong tax base from which to derive tax revenue. The disposable income in the hands of your populace is very important for you to be able to derive tax. How many of us have engaged as government in research to see where the pockets from which to develop a strong tax base from are.

 I don’t think we have seen tax as a very scientific and professional process that you can do research around and come with logical conclusion. I think, perhaps, more of the constraint is that we see tax more as a collection thing – collect as opposed to administer. 

So it is more of collection, where do we collect money from? I hear this people have money, let’s collect, I hear those people have money, let’s collect. It doesn’t work that way.  Sometimes because people have money, you may actually reduce the tax they pay so that you can encourage them, for their businesses to do better, so that way, they can give more revenue to their staff, who in turn expand the tax base and give you more money.

There is a difference between having a collection mind-set and a larger mind-set that is more administrative and long term in nature, to say, what would the implication of this action on the revenue of this company be? Would they be able to employ more staff? And if they employ more staff, would that add to the tax base and, therefore, would the multiplier effect of whatever decision I take now come back to me as additional revenue? I’m not sure we have put in place that rigour and discipline to go through the whole hog. That is why I think we need to shift from mere collection to the totality of administration of tax.

 

Do you subscribe to the view that the oil revenue has been a disincentive to developing ample interest in taxation?    

Yes, it has. Oil revenue now has dropped. But what we did over the years – I’m not discussing now or even the last five years – is that we formed negative habits, habits that do not encourage you to explore other sources of revenue because we have money from oil. You could call it part of the oil curse. It has affected our capacity to act; it has affected our comfort level. 

So moving out of our comfort zone now is a little bit more difficult than if it were we didn’t have oil. I agree with you that it has been a disincentive.

But my own philosophy in life is, let’s accept that that is what has happened, but we need to move on. Oil is not there anymore. Even the forecast for oil in the years ahead shows that we are in for a low oil price for quite some time to come. Unless something happens, this is the possibility. But we shouldn’t also be managing ourselves based on possibilities. We should manage ourselves on those things that we believe we can control as much as we can and have a much more diversified revenue base so that if any shock happens, we can rely on other sources of revenue.

What can be done to maximise tax revenue in Nigeria?

 I subscribe to the See-Do-Get paradigm. That’s from Franklin Covey’s copyrighted material. What the See-Do-Get means is that how you see things affects what you do, which in turn affects the result that you get. I think a lot of times we only play in the Do-Get realm – if you do this, you get this result – without fundamentally asking ourselves, the way we have been seeing things, shouldn’t it change? I won’t spend time, therefore, emphasising the things we do because I’m not even sure we’ve started thinking differently so that we can do those things that would give us better tax revenue. At the See level, it’s not about tax collection, it is about tax administration. 

It’s not about tax consultants, it’s about tax professionals; it’s not about manual tax processes, it’s about automated tax processes. Because anywhere in the world, the more manual your system is, the more the level of leakage. And the less connected we are as government, the less taxes we can collect.

There is no magic that efficient tax systems do other than the fact that, if for example, you took your child to school, your national identification number would show that your child is in A school, and because A school, too, is on the database, they know what kind of fees A school would charge you for you to keep your child in the school. And then, you leave school and go to the hospital, you still use that national ID system, it revolves around you and they know which hospital you go to for your child. And you go to the supermarket, again that card or visa card you are using to pay is linked to your national ID card, so they know how many purchases you have been masking. Your whole life is linked electronically. So if you file a return and say, I only made N100, 000, how would the system know that it’s only N100, 000 you made if the systems are not linked?

Data is the major driver of tax revenue. We need to get certain things right, we need to harmonise our ID system, link the banking system to the tax ID, national ID, and ensure everything is on the same platform. Until we recognise that when you demand a service from government, you need to see, too, that taxes are paid, we cannot even move forward because the system will not allow you to move forward. That realisation forces you to make certain payments along the line, not a human being forcing you. Until we see that it’s not the amount of time you put into solving a problem, but how effective your system and processes are to generate the revenues that are there, it’s not going to work. And until we see that it’s not about federal or state or local government. It’s all federal, state, local governments connected to each other that would make the system work. It’s not about, you have N100, 000, I’m going to grab N20, 000 from it today. That would only work for a while, it’s not sustainable.

What do you see the role of legislation here? Do you think the country has adequate laws to effectively drive the tax system?

 We have enough laws. I think it is more of implementation. That is not to say that laws cannot be improved. You can improve the company tax laws, personal income tax laws, etc.  But even with the laws that we have, we can do more. That’s why I’m saying the level of automation should be improved. And these are not short term measures. It’s not an FIRS thing, or a state internal revenue service thing, it’s a national thing. 

Everybody coming together to work together towards contributing to each other, exchanging information to ensure that revenue from tax is maximised at the federal, state, and local government levels.   

 

How do you see the issue of deducting tax and not remitting, which is a commonplace practice in many organisations?

 It’s a problem. It should be dealt with.

 

How best can it be dealt with?

 At the relevant levels that do the monitoring. Again, the more automated your systems are, the better. If, for example, every time such monies are deducted, just like the way you get an alert when money is withdrawn from your account, there is an alert that goes to the federal or state inland revenue service, as the case may be, then that triggers monitoring. But if there is no alert, and there is no way of knowing that the company has done this, without the staff themselves speaking up, then you are leaving it to human beings. And when you leave a system to human beings, everything around the human instinct affects the outcome. May be the human beings are afraid to report the company because that is where they get their salaries, they don’t want to lose that small salary, they don’t want to be sacked. So they don’t want to give feedback to the revenue authorities on what is going on. May be the company happens to have friends in high places, so even if they know this is happening, they turn a blind eye. We should not leave our tax system to the imaginations of human beings.

 

Are there other things you would like Nigerians to know about the issue of tax revenue? 

Whatever I’m going to say is not new. The payment of taxes is a civic responsibility. It’s the license that says that you belong to a country and gives you a voice to speak about that country. Therefore, payment of tax should be seen as not even something that should be forced, it should be seen as a responsibility, so that when we complain, we have backed up our complaint with the moral right to make such complains. I know it’s tough, particularly now, to ask people to pay tax. First of all, their baseline revenue has been significantly eroded. I don’t envy the people in the revenue service at this time. 

The incomes of companies have gone down, people are being laid off, costs are on the increase. I think it is a time for mutual understanding and collective views as to what we need to do. These are rough times, but for as long as you are a citizen of this country, you need to pay something, no matter the level of tax, but at least pay something.