Akinwumi Adesina, president of the African Development Bank (AfDB), has cautioned the federal government against the hasty implementation of its tax increment plan, arguing that the country’s relatively low tax-to-gross domestic product (GDP) ratio at 6.1 percent is not a justification for incessant tax increase.
Adesina, who gave the advice while delivering a lecture at the 51st annual conference of the Institute of Chartered Accountants of Nigeria (ICAN) with the theme, ‘Trust in Governance’, said that it will be double jeopardy to over tax citizens who have for a long time, provided basic amenities the government has failed to offer.
Giving a comparative analysis between Nigeria’s tax rate and that of other countries whose citizens pay higher, Adesina noted that while other countries with high tax rates have functional free education and free health care systems, such cannot be said for Nigeria.
Citing the case of Norway and Singapore with tax-to-GDP ratio at 39 percent and 13.2 percent respectively, compared to Nigeria’s 6.1 percent, the AfDB boss said it is easy to make a comparison and say Nigeria needs to raise its taxes to similar levels as in both countries.
He, however, pointed out that while Norway, Singapore, and other countries with high tax rates provide functional free education, free healthcare systems among others, such cannot be said for Nigeria where residents sink their private boreholes to get water, generate their own electricity, build roads to their neighbourhoods, provide security services themselves, and provide other basic essential facilities that should have been made available by government.
“These are implicit taxes, borne by society due to either inefficient government or government failure. As such, we must distinguish between nominal taxes and implicit taxes — taxes that are borne by the people but are not seen nor recorded,” he said.
To ensure an accountable and effective taxation system, Adesina said governments must fulfil their part of the social contract and allow the citizens a right to know how public finances are being expended. This, he said, would encourage citizens to pay their fair share of taxes.
Adesina also emphasised on the development of a ‘People’s Index of Governance’ with citizen accountability forums to monitor resource management and bridge the gap between the leaders and those that are being led.
“Leaders must not only be accountable; they must live simply. Power is not judged by wealth, but by transforming the lives of people. To earn the trust of people, we must create people’s wealth, not simply personal wealth,” he advised.