According to HRH Eze Chris Onyegbule, during a period of economic recession, government should use taxation to ensure social justice through income redistribution to bridge inequality.
Onyegbule who is the traditional ruler of Amangwo autonomous community in Olokoro, Umuahia South Local Government Area of Abia State and a former Secretary of Federal Inland Revenue Service (FIRS) Board, however, decried the low level of tax compliance in Nigeria, saying it was one of the lowest in the world.
Speaking with News Express in his palace, he maintained that government should offer tax incentives to firms that would boost the economy of the country and tax consumers of luxurious products higher.
“The best time to evaluate taxation is a time like this when the economy is bad. Industries are being closed down and they are shrinking in size. So the role of taxation will now be to use taxation as an incentive to encourage some companies,” said Eze Onyegbule, who is also the Dean, Chartered Institute of Taxation.
He was of the view that tax incentives would help some firms to come on board. The royal father noted that in Nigeria, there should be discrimination in terms of rates such that taxation would be used as a tool for income redistribution.
“For example,” he said, “when you talk about Value Added Tax (VAT), here, we use dual rate but actually one effective single rate. Everybody pays at five per cent.
“If the rate was discriminatory, those enjoying luxury products should pay more so that if I bought a luxury phone, I should pay at a higher rate.
“If people bought all these flashy cars and private jets, you tax them higher as a means of getting resources and transferring those resources to those things consumed by the masses.
“These are some of the things you expect taxation to do, income redistribution. This person is earning so much, he is comfortable but the other person can hardly meet daily requirements, he can’t go to a private hospital, only a government hospital,” he said.
He added that “by the time you take out more money from those who have into the coffers of government and use it to provide, for example, health care and all those type of things, you are actually redistributing income.
“So, taxes, you use it, not just for revenue which you give to government to provide the amenities, but also for social justice, taking more from some people and giving to the needy as a way of balancing the society, otherwise, you have this inequality increasing everyday,” he added.
The former Regional Director, Commonwealth Association for Tax Administrators, noted that the level of compliance by Nigerians in tax payment was one of the lowest in the world.
“One of the ways you measure performance is to check the Gross Domestic Product (GDP), and to say, what is the contribution of taxation. The contribution of taxation to GDP in Nigeria is one of the lowest in the world. May be the burden is on top, those who should pay are not paying enough or are not paying at all because people say they have high tax burden,” the royal father said.
Giving reasons for the low tax compliance in Nigeria, he said: “When you talk about tax compliance, it is the ability of people to pay on their own, voluntarily. They can only do that because you have fulfilled their own expectations; the security is okay, the infrastructure is in place, the educational system is well managed and all that.”
He noted that although paying tax is compulsory, “people pay because of an expectation; that you collect taxes because you are going to offer them security, you are going to provide infrastructure, which is why they are paying.
“So, it is not really correct that people pay taxes only because it is compulsory. They pay because it is compulsory, but also because it is like a social contract with government: pay me this money and I will use it to provide all you need,” he explained.
He expressed mixed feelings that Tax Administrators were appraised based on government performance, explaining that the job of the administrators end when the tax is paid into government coffers as they do not have control over what and how the money is used.
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