Nigeria 2020: More powers to the taxman

As the last month of 2019 rolls by, there are indications that whatever euphoria that may usher in the new year of 2020, may be short-lived for many Nigerians. And this may be due to the incoming regime of new taxes that may increase the complement of extant ones, a widened tax-net and expanded powers of the tax authorities across the country. Among the most worrisome to the Nigerian public for now is the plan by the government that as from January 2020 no bank customer will carry out any transaction in the country’s banks without a Tax Identification Number (TIN). The National Assembly has just passed a Finance    Bill which has conscripted the country’s banks into the government’s tax drive. According to the Minister of Finance Zainab Ahmed as soon as President Muhamadu Buhari signs the bill into law, persons intending to open new bank accounts will have to provide a TIN, just as older customers will also provide same before any transactions.

The aim of this measure is to expand the tax net to accommodate as many Nigerian taxable citizens as possible. According to a recent study on Nigeria by the international Monetary Fund (IMF), only 10 million out of a possible 77 million Nigerians are in the tax net.  And these comprise those who are easily identified and compelled to be taxed such as public servants, and operators in the formal sector of the economy. The rest of the possible entrants into the tax net are mostly operators in the informal sector who are only taxed when they have official business with government regulatory agencies or banks as the case may be. Government attention on them becomes easily understandable given the potential of humongous harvest of tax revenue derivable from them.

Beyond the conscription of the banks to cage Nigerian taxables, is the complement of efforts to tax the informal sector directly. The Rivers State government recently released a chart of rates for assessing and collecting taxes from all categories of informal sector operators ranging from street hawkers to operators of medium scale factories. The chart delineates the taxable persons and entities into three categories of micro, small and medium business sizes provides an interesting experiment on managing the regulation, and taxation of the SMEs.

Government’s interest in the informal sector is coming against the backdrop of its apparently increasing desperation over the mismatch between its revenue base and the budgetary obligations. For instance, in the forthcoming 2020 budget which is still in the works, the sum of N2.18 trillion or 1.52% of the country’s Gross Domestic Product (GDP) is earmarked for deficit, in order that government will meet its obligations. And this sum to be funded through borrowings from both domestic private and foreign sources. Based on this consideration President Buhari resubmitted a request for a fresh foreign loan of   $29.96 Billion which many Nigerians have raised strong reservations against.  The reservations are informed by the widespread mistrust of the government’s management of public finance, especially the regime of foreign loans. Of particular concern is the matter of Chinese loans consideration of which have shed goose pimples on many Nigerians, over what happens if this country defaults on such facilities, given the unforgiving disposition of the Asian giant to insolvent debtors. On a daily basis the tales fly out on how the Chinese seize the valued assets of countries that fail to pay their debts, with several East African countries as examples. There is therefore a gnawing feeling among not a few Nigerians that the new powers granted the tax authorities are intended as a fall back dispensation just in case the government fails to secure the loans.

However more significant is the situation whereby government is squeezing the into citizenry further economic straits when the economy is yet to bounce back into a sustainable expansion to provide for increasing prosperity for the people. Even as the government may not admit readily, its Economic Recovery and Growth Programme (ERGP) is yet to manifest sustainable growth. Hence the question of how the government will expect optimal tax returns from the citizenry.

In the final analysis while the tax authorities may have been granted more powers, the dwindling pockets of the citizenry need to be factored in with respect to government expectations of more tax revenue in 2020.