TSA gains better than its pains –Ighodalo, SIAO MP
By Simeon Mpamugoh
Ituah Ighodalo is the Managing Partner, SIAO, a firm of Chartered Accountants and Auditors. A cleric and fellow, Chartered Institute of Taxation (CIT), Ighodalo in this interview with Daily Sun in his Ikoyi Lagos office, observed that tax administration in Nigeria has not been done sincerely, scientifically and genuinely, adding that it has been fraught with corruption.
He noted that having Value Added Tax (VAT) reside where it is generated is one of the tools to encourage initiatives, creativity for states trying to manage their own resources. He speaks more on sundry issues within the economy, including the Treasury Single Account (TSA) as well as his thoughts on Voluntary Asset and Income Declaration Scheme (VAIDS) in improving the declining revenue from oil to drive sustainable development.
TSA as an accountability tool
TSA has been there; it was just that for whatever reasons, some departments of government are not fully implementing it. The reason people are groaning now is that it came with a bit of a shock and mopped up a lot of excess money lying here and there. I think the other thing it did was to control, to a large extent, government profligacy and minimised corruption. I know for a particular fact that it did that. But the counter to that is that it has also restricted the economy in that money that was available before for banks to lend was no longer available. I think that if government can stick it out, the gain is a bit better than the losses. Banks have to start looking for real and new ways of creating wealth and funding the economy and stop relying on excess liquidity provided by government. I think, after a while, people would get used to it.
Nigeria’s exit from recession
To be honest, I think a bit of it is information management and trying to get people excited, happy and to also look forward to it, which is part of governance. Again, I think it is a tool government is using to get our people excited and thinking, “Is it true that the recession is receding?” There is no real evidence. But when you begin to speak it and tell people, that good feeling begins to come unto them. And that also helps to really get us out of the economic recession. I would like to say that we are becoming a bit more stable. It will take us another few months, may be middle or towards the end of next year to be fully back on the beat. What is more important is that the whole economy needs to be totally restructured in such a way that we are no longer a mono product country but one that is harnessing all our potential resources especially a lot of our agriculture, other minerals and non oil, even invisible trade like tourism and services. A lot of countries live on tourism and services especially banking services. Nigeria has so much potential that we must stop depending on oil.
Fiscal restructuring that would allow states charge over revenues like VAT from their territories is also important. I think one of the places the federal system failed is that it no longer encourages initiatives, creativity and thoughts in states trying to manage their own resources. There is no part of Nigeria that is not economically viable, if only the people can think and develop themselves and their environment. So, if they can get the benefits of the commercial revenue that passes through their states, it would encourage them more to work on what they have. I think having VAT reside where it is generated is one of those tools to encourage it.
APC-led government and the economy
To a large extent, the present government has done well in security but in terms of pointing a clear direction of the economy, there is still more to be done. The reasons for that are that the government started slowly. The time it took to choose ministers and get them to hit the ground running took a while. President Muhammadu Buhari was at that time trying to get his hands back on the economy and understand it without too much political influence and may be, try to take his time to choose what he thought would be a decent team. What that did was to slow down considerably the economy.
Secondly, what government found in the treasury and the economy when it got there was total shock. May be they thought it was half full but they didn’t know it was totally empty. Again, that was a shock. Thirdly, the ill health the president suffered shortly after that also didn’t help matters and it put the country on the brink of not knowing what to do at the time. The fourth reason is that the people around the presidency have not allowed the benefit and synergy of the vice president and the president working together as a seamless team, helping one another’s strength and weakness, to work. They have not allowed that synergy to truly benefit Nigerians for one reason or the other. While I think we have a good team in Osibanjo and Buhari but the benefits and then synergy have been slowed down by political circumstances around both men. By and large, the government has not been able to give clear vision and direction as to what they truly want to achieve.
I think Nigeria is a big economy with a population of almost 180-200 million people who need one thing or the other. First, I don’t think Nigeria should be importing its basic needs like food, water, toothpick, among others. Everything we eat, drink and use for basic consumption and maintenance should be manufactured in Nigeria. The only things Nigerians should import should be machinery and technological equipment, definitely not petrol, with our refineries, not food, household consumables like soap, detergent and disinfectants. No, no! Nigeria should have gone beyond all that. So for anybody who wants to go into those kinds of businesses, using local raw materials, electricity or not, can still make quite an impact within two and half to three years if they focus on it and are honest and ready for what is called delayed gratification. Also, we should really quickly work aggressively on an alternative energy resource rather than depending on oil.
Ease of doing business reforms
We needed the reform to propel the economy forward. Economies like Singapore, Dubai and Switzerland thrive on ease of doing business. What that simply means is that; ‘how easy is it for somebody to start and run a business from scratch? How easy for a foreigner to come into Nigeria and start a business’? In Singapore, within 24 hours, one can come in, register his company, get an office and start his business. In Dubai, I think it is about 48 or 72 hours. It means, therefore, that more people can come in to drive the economy. In Nigeria, it takes about three-four months, may be six months, for one to come in from outside and successfully start a business. For somebody within the country, may be three-four months; it slows the economy down. What are the milestones? The ability to register a business, get business tools, land rights and ownership, security around the environment, and coming in and out of the country.
I like the fact that the vice president and his team have faced it head on and we have seen some benefits. They have moved 22-24 point up the index, which is very commendable. The ability to get your tax assessment, pay your tax and get all the government regulations you need to do business; they need to move very faster; they need to move being able to get to Nigeria and within a minimum of two or three weeks maximum, your business is up and running.
Governments’ engagement of private sector in policies formulation and implementation
I think a lot of the governments have not taken the private sector and other people too seriously to get them to be involved in the policies except when crisis comes and they need to set up ad-hoc committees to try and solve or resolve one crisis or the other. A lot of other countries have various books and pockets of people in different areas; the young and old they talk to, whose opinions they need to sample in arriving at a decision. Most times government’s work is highly politicised. Politicians would form themselves into caucuses and groups to drive what they think the people want and they keep going. And a lot of it also have self-interest that from day one the whole thing is skewed, and almost organised to fail. Buhari’s government has not faired, not even done too well in this regard. A few pockets of people they talk to, but they don’t have formal pockets of people. Every government should try and have a formalised sector they talk and listen to whose opinions they take in arriving at particular decisions.
SIAO’s concern about the level of corruption in public corporations
We are very concerned because corruption is one of the things that bring economic failure. Most economies that have failed, that are not growing or developing, are largely because they are corrupt. And it leads to misallocation of resources such that people who shouldn’t have power and economic strength have them. It also takes away a lot of revenues and funding out of the economic environment. For example, one of the reasons the exchange rate fell drastically when Buhari came in was that a lot of the foreign exchange that had been seized by corruption had to be hidden and people can’t bring them out because of fear of being questioned. If we’ve had the old regime, a lot of that money would have come out, and the rate would have gone so high.
That is one of the things corruption does to an economy.
How well have we used tax as a non-oil revenue to buoy growth and development?
Tax administration in Nigeria, again, has not been done sincerely, scientifically and genuinely. It has been fraught with corruption. In a country where you don’t even have enumeration or database, how can you effectively collect tax? You don’t know how many citizens and companies you have registered. And even if you know them, you don’t know where they live, you don’t have their residential numbers so that you can go after them.
It is not possible to effectively tax people because there is a lot of what is called informal economy in Nigeria; cash-based transactions. And that is why former Central Bank of Nigeria (CBN) Governor, Lamido Sanusi Lamido, made it cashless environment so that it would trigger off, improve the economy and make governance what it should be. It costs a lot of money to print money and manage it. Sanusi was trying to bring the cost down and pull a lot more people into the formal economy. There are many traders in Nigeria making good money who are not paying tax.
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