Tax Compliance And Good Governance Should Go Together
Channel: Prof. Yemi Osinbajo
Date: 17/05/2018

SPEECH BY HIS EXCELLENCY, PROF. YEMI OSINBAJO, SAN, GCON, VICE PRESIDENT OF THE FEDERAL REPUBLIC OF NIGERIA, AT THE CITN 20TH ANNUAL TAX CONFERENCE, HELD AT THE NAF CONFERENCE CENTER AND SUITES, KADO, ABUJA, ON WEDNESDAY MAY 9, 2018.

 

PROTOCOLS


It is my special pleasure to be here with you at this 20th Annual Conference of the Chartered Institute of Taxation of Nigeria. Indeed the theme is a very apt one; Institutionalizing a culture of tax-paying in the 20th century, and it is apt because this is the time where we are in search of the solutions to widening our tax base.

Distinguished guests, Chief Obafemi Awolowo otherwise known as Awo, died this day, May 9, 1987, about 31 years ago. He was Premier of the Western Region of Nigeria from 1954 to 1960.

The Western region is what today constitutes Oyo, Ogun, Ondo, Ekiti, Osun, parts of Kwara and Kogi, Edo and Delta, Lagos( as far as Jibowu/ Ikeja, Agege).

The six-year period of the Awolowo government is often cited as one of the most progressive of any government in the developing world. Some of the major accomplishments include the University of Ife (now Obafemi Awolowo University), the 26 Storey Cocoa House, Ibadan – an architectural wonder at the time, Western Nigeria Television, WNTV (first of its kind in Africa), the Ikeja industrial estate, several farm settlements, Airport Hotel, Ikeja, as well as several industrial establishments, including Oodua Textile Industries, Ado Ekiti, Okitipupa Oil Palm Mills, Oluwa Glass, Ifon Ceramics, and Ire Ekiti Brick Industry, a network of roads across the region.

But by far the most significant of these achievements is the Free Universal Primary Education. In 1952 when the scheme was proposed, 381,000 children (about 30%) were enrolled in school. By 1955 when the scheme took off 811,432 children were enrolled. And the numbers continued to grow. The Government devoted as much as 41.2% of its 1958/59 recurrent budget to Education, one of the highest in the world at the time. The Western region of Nigeria, at that time, was educating more children than anywhere in Africa. At the same time, the region nurtured a vibrant civil service and judicial system, which is widely acknowledged as a model, even today.

So how were Awo’s phenomenal achievements possible? There was no oil revenue and no federal revenue. In fact, the Western region, as well as other regions, had to give revenue to the central government. How did they do it? Mostly taxes and revenues from agriculture, especially Cocoa.

Free education which was audaciously launched by the Awolowo Government was directly on the back of income taxes. A capitation or poll tax was imposed by the Western Regional Government mainly to fund free education, despite much opposition and protests at the time.

With Military rule from 1966 and oil money, everyone forgot about taxes. The Federal Government gave everyone an allocation.

So, today the states in the old Western region, aside from Lagos, do not earn enough in taxes or anything else to pay salaries let alone do major capital projects. Without federal allocation, most states cannot survive.  I am sure you are familiar with the statistics, Lagos state alone takes in as much IGR as 31 states combined. It tells you how little the other states manage to bring in IGR.

This historical analogy of the old Western region and fate of the states that now constitute it explains the low level of tax compliance; the now-well-known fact that our tax-to-GDP ratio stands at only 6 per cent, although we are told that it will improve with VIADS and some of the steps taken already by the FIRS. This is obviously a dismal figure when compared to other countries at similar levels of development: Ghana, Egypt and India at 16 per cent, South Africa at 29 per cent.

That our tax-to-GDP ratio is one of the lowest in the world should in fact surprise no one. As of May 2017, of the roughly 70 million Nigerians who are economically active, only 14 million – or twenty per cent – paid any federal or state taxes at all. The number of Nigerians who pay more than N10million in self-assessed taxes is even more astonishing. As of December 2017, only 943 Nigerians pay self-assessed taxes of over N10 million and of that number 941 to live in Lagos State, the other two live in Ogun State.

Admittedly, tax is not an issue that excites citizens anywhere around the world. It is a favourite of those who love chicken-and-egg arguments: which should come first: paying taxes or enjoying the dividends of good governance?



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Oluyemi Oluleke “Yemi” Osinbajo is a Nigerian Lawyer and politician who is the current Vice President of Nigeria, in office since 29 May 2015.

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