In support of Ambode’s tax drive

LET me shoot straight from the hips this morning: I am not ashamed or afraid to support Lagos State’s Gov. Akinwunmi Ambode’s tax drive; neither am I careful to play the devil’s advocate by answering critics of the steep rise in payable tax or taxes as recently announced by the Lagos State government. In fact, it is like Ambode read my mind. The propertied class must be appropriately taxed. Taxation is one effective tool to employ to address social and economic inequality which festers by the day. The yawning gap between the haves and have-nots must be bridged using the instrumentality of effective taxation.

For years I have silently noted that Lagos would need to raise far more revenue from taxes and that the N25billion monthly Internally Generated Revenue being celebrated is measly and evidence of under-achievement. Wait for it – I believe Lagos can, and should, raise close to one trillion naira from IGR monthly and one of the areas I have targeted this to come from is the Land Use Charge and or tenement rate. Land and property are two of the greatest assets and money spinners at the disposal of Lagos State. The others are Value Added Tax (which, regrettably, the FG has appropriated), income tax, and fees from refuse disposal where this is properly and profitably harnessed, which, unfortunately, is not the case at the moment. I have never believed Lagos to be doing enough in these areas – and if it must be transformed from the slum that it is in all ramifications and be elevated comparatively to its peers the world over, N25 billion monthly (less than US$100million) IGR cannot build us a mega city comparable to New York, Buenos Aires, Jo’burg, Cairo, Dubai, Singapore, Hong Kong, to mention but a few.

The outcry against the new tax drive by Ambode can easily be understood, though. We used to pay tax; I grew up knowing that tax collectors chased our fathers all over the place collecting “owo ori” but the discovery of crude oil changed that. Most of the achievements of the Obafemi Awolowo era came from our fore-fathers’ taxes but we their children have become tax evaders. We now rely mostly on handouts from the Federation Account. This runs counter to the grains in serious countries of the world where government business runs on taxes. In some of these countries, which we are aware of, people pay as much as 40 per cent of earned income as tax. Unlike us, these are countries with little or no natural resources but which have harnessed taxes to become First World countries. We love to enjoy the goodies they have provided for themselves with taxes, so we “Andrew” there, with all the attendant risks, shame, disgrace, and opprobrium. Running away from the “shithole” here to the El Dorado abroad is not an enduring legacy; doing the needful here offers a better and more long-lasting solution.

We want the good life but are not willing to do the needful to achieve it. We love omelette but are not ready to break eggs. We cannot develop that way. We cannot bring our country on a par with the advanced countries if we continue to shy away from responsibilities. We must be ready not only to pay tax but to pay commensurate and meaningful tax. According to statistics, less than a quarter of the taxable population pays tax. Compare this to not less than 80 per cent compliance in First World countries, without any tax official coming after them or breathing down their neck!  Corruption has eaten deep into the fabrics of our society. Even the peanuts that people are supposed to pay as tax, they still collude with tax officials to have it manipulated and drastically reduced. They then share the illicit gains with corrupt tax officials who end up receiving even more than the government.  We want all manner of services provided by government; yet, we are not ready to pay commensurate tax. We expect the humongous amount needed to provide such services to come solely from the Federation Account. This is a tall order.

With dwindling resources at the Centre, there is no way the Federation Account alone can sustain a mega city like Lagos or any other state for that matter. Of all the 36 states of the country, Lagos alone is able to do without handouts from the Federal Government. Commendable as that is, it is not good enough if we do not want the state to just live from hand to mouth.

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Government, however, has its own part of the blame; like in most things Nigerian, we have left a gaping hole in the tax structure for too long and now we seek to cover the gap in one fell swoop – that is what has accounted for the steep rise between the existing tax structure and what is being proposed. If taxes have been raised incrementally over time, the “sharp increase” that people are complaining about now would not have been there. We are usually too much in a hurry to cover lost ground and our fire brigade approach often imperils good ideas. A better approach would have been to first draw as many people as possible into the tax dragnet with considerably lower rates and create a data base that will ensure that the vast majority of taxable citizens are captured. That way, we will gain more than when we discourage and drive people away with “unreasonably” high rates.

I have deliberately put “unreasonably” in parenthesis because, in the real sense of the word, the new or proposed taxes are not unreasonable if scrutinised carefully. If the owner of four three-bedroom flat collects N400,000 annually from each tenant as rent, making a total of N1.6million, I do not think it is too much for this landlord to pay 25 per cent as tax, which comes up to N400,000. Is the new Ambode tax that high? Yet, this is the range of tax we must be willing to pay to bring Lagos to the level that we all clamour for. We must be prepared to walk the talk, as they say. I, however, do not think a property’s value should determine tax payable. For property that is commercial, the income it generates should form the basis of tax assessment and I propose 25 per cent flat rate.

Ambode also has to plug all loopholes, especially stop budgetary allocation to agencies that are drain pipes when they should have been cash cows. Competition helps efficiency, transparency and accountability; therefore, the reported stranglehold on the Lagos tax system by a preferred competitor must be broken. Cronyism and nepotism; indeed, corruption of all hues, be it of Muhammadu Buhari, Bola Ahmed Tinubu or anyone else for that matter, must be condemned in all its ramifications.