Taxation Beyond FundraisingBy Kriz David

Unimpeachably, taxation remains the surest and sustainable source of revenue to the government of any nation. Taxation isn’t a fund-raiser! When more tax-types are imposed on citizens, they do not translate into more revenue; nor does the imposition of higher tax rates or tariffs guarantee more revenue to government. Suffice it to say that the fixation on taxation as fund-raiser is the bane of Nigeria’s low tax revenue.
Increasing the rate for tertiary education tax, for instance, will not solve the funding challenge of education in Nigeria. Taxing educational institutions and imposing annual proof of ownership for vehicles will not also solve the debt crisis in Nigeria. There are tested models that guaranty positive outcomes for effective taxation.

To optimize revenue from taxation and attain fiscal sustainability, the cannons that undergird effective and efficient tax system must be adhered to. For instance, the cannon of equity enounces that citizens of every State should contribute toward the support of government in proportion to their respective abilities. This means THE RICH SHOULD PAY MORE TAXES WHILE THE POOR SHOULD PAY LESS. It also means that some people are too poor and should be left out of the tax net. This cannon is fundamental to fostering social justice through the redistribution of wealth in an economy.

The recent hike in pump price of fuel and exchange rate will only worsen unemployment rate and get more citizens multidimensionally poor. The benefit of experience has taught us that creating additional taxes and levies and increasing the tax rates will not solve Nigeria’s fiscal crisis. The only lasting solution to optimize tax revenue is to address the ill-designed tax policy mix. An appropriate tax policy mix and design should promote the following:
Equity – the current personal income tax act is poorly designed, unjust and not equitable. The wealthy are currently not paying their fair share of taxes. With a well-designed personal income tax act, State Governments should generate over N15trillion from 10 million individuals in Nigeria. Eighty to ninety percent (80% to 90%) of the tax should be paid by the top one percent (1%) wealthy Nigerians.
Wealth Creation or Capital Formation – leave market women, street traders, artisans and other low-income earners alone. They are not the reason why Nigeria’s tax-to-GDP ratio is low.
Fewer Taxes – there are just too many taxes and levies in force. Paying taxes have become a huge burden on businesses and individuals in Nigeria. Only few broad base tax should be enforced.
Appropriate Tax Rates – strike the appropriate balance between the companies income tax rate and the Value Added Tax rate.
Strategic Tax Expenditures – avoid indiscriminate tax and duty waivers, but drive fiscal development in specific domains with strategic tax expenditures.
A fair tax system is one of the pillars of a prosperous nation. Taxation is not fund raising, but a catalyst for economic development and prosperity. Citizens will generally comply with tax laws and pay their fair share taxes when tax policies are well designed to ensure that tax burdens and benefits are equitably distributed, while politicians and public officials provide stewardship of the revenue generated through taxation.
Dr. David is a futurist and a public policy expert. He is the author of “Tax Strategy” and “The Tax Manual”. He can be contacted on kriz@krizdavid.com or 08034033979.