TAX SYSTEM AND EXTORTIONATE LEVIES

The correlation between fairness and efficiency in tax administration does not appear to have been
obvious enough to the nation’s policy makers. The Lagos State Government has, however, identified
the gaps existing in the tax system and resolved on appropriate remedial measures. At an interactive
session with officials of the Institute of Entrepreneurs of Nigeria, recently, the Special

Adviser to the Lagos State Governor on Taxation and Revenue, Mr. Ade Ipaye, observed that illegal,
extortionate levies by Local Government Councils, collected through touting and intimidation, have
forced businesses underground and kept otherwise taxable citizens out of the tax net.

While assuring that all illegal levies would be eliminated and methods of collection streamlined, the
Special Adviser declared, “The state wants to achieve fairness and equity by ensuring that all
chargeable persons are brought into the tax net.” The guiding objective of the state’s tax policy,
according to him, is “to significantly improve quality of life in Lagos State.”

It is, indeed, a task that is long overdue, to have local councils and their agents/revenue contractors
operate responsibly and within the bounds of the law in matters of tax administration. In virtually all
the states of the federation, Nigerians and business organisations have for years been subjected to a
most oppressive, brutal and corrupt system of taxation that has greatly stymied any inclination to
discharge civic and corporate responsibilities.

Not only do councils elongate, at will, what is statutorily permissible as taxes and levies, they also
arbitrarily determine the rates payable by whomever they adjudge to be taxable. That much was
recently revealed by the Secretary of the Joint Tax Board in Lagos, Mr. Femi Edgal. According to him,
“there is no fixed rate for those taxes and levies collectible by the local governments.” Back in 2007,
the Board had declared that there were as many as 84 illegal taxes collected by states and local
councils.

In different parts of Lagos, Ogun, Oyo, Ondo, Edo, Anambra states, and other parts of the federation,
revenue collectors who are no better than bandits mount road blocks, where they stop vehicles and
demand receipts for taxes that oftentimes do not exist in the statute books. Those who have paid
prescribed taxes in their states of residence, are forced to pay additional taxes purportedly
prescribed by the government or local council of whatever state a traveller finds himself or herself
in. Sometimes, spiked sticks are thrown in the path of a fast moving vehicle that refuses to stop at
the road block.
Touts and ruffians parading as council tax collectors on the nation’s highways are doing so against
the law. The Laws of the Federation of Nigeria (Taxes and Levies {Approved List for Collection} Act 21
of 1998) prohibit such activities.

Section 2 (2) of the Act states, “No person, including a tax authority, shall mount a road block in any
part of the Federation for the purpose of collecting any tax or levy.” In Section 3 (b) are penalties for
contravention of that Section of the Laws.

Nigerians and corporate bodies have to pay all statutory taxes and levies, but all tiers of government
must sanitise the system to eliminate illegalities and crooked agents/revenue contractors. They must
ensure that tax policy, generally, is progressive. The government is equally under obligation to
demonstrate that state policy and actions are driven primarily by considerations for the welfare and
security of the people.

The underground economy has been around for too long, to the detriment of the government and
people of this country. Businesses and taxable citizens hitherto outside the tax net have to be
brought within it to bolster the capacity of government to provide basic amenities and social
services that the society needs to function efficiently. In order to bolster tax revenue, the economy
should be revamped to return more firms and people to work and wealth creation.

Fortunately for the citizens and residents of Lagos State, the motivation to pay legitimate taxes and
levies is everywhere to be seen, as the current administration in the state is responsive and purpose-
driven.

Source:

The Punch Newspaper

Friday, May 15, 2009