Chairman, Nigeria Governors’ Forum (NGF), Governor Kayode Fayemi of Ekiti State, and Chairman, Nigeria Governors’ Forum (NGF) on Wednesday disclosed that the domestication of various reforms over the past six years, yielded a compound annual growth of 12% from N687 billion in 2015 to NGN1.21 trillion by 2020.
The reforms, according to him, include legal revisions, policy directives, institutional restructuring, and technological innovations to improve tax administrative processes and procedures.
Governor Fayemi stated this in Abuja at the 7th NGF IGR Learning Event with the theme: ‘Setting the social minimum through tax for service programme’, which was instituted to bring together critical stakeholders, policymakers, and professionals to discuss and proffer innovative strategies to assist states to achieve their revenue potential.
He however observed that the marginal growth in the IGR of States recorded year-on-year from 2016 peaked in 2019 and recorded a decline of NGN43.15 billion (3.4%) for 2020.
According to him, the event also fosters peer learning amongst States on associated reforms. Recommendations from this annual event continue to provide us, State Governors, with invaluable guidance on reform prioritization year-on-year.
“Over the last six years domesticating various reforms advocated by this platform, States have recorded a compound annual growth of 12% from NGN687 billion in 2015 to NGN1.21 trillion by 2020. These reforms comprise legal revisions, policy directives, institutional restructuring, and technological innovations to improve tax administrative processes and procedures. Still, the marginal growth in the IGR of States recorded year-on-year from 2016 peaked in 2019 and recorded a decline of NGN43.15 billion (3.4%) for 2020.
“Although, the COVID-19 pandemic contributed strongly to the decline recorded, our tax effort (tax-to-GDP) as States is estimated to be less than 3%. Advancing beyond our current revenue levels will warrant more systemic reforms to address low tax morale and voluntary compliance by taxpayers.
“The growing wave in tax avoidance and evasion especially among the informal sector is not unconnected with their belief that such cognitive dissonance is right. Such justification is often predicated on the principle of reciprocity and economic exchange for which they fault government’s commitment.
“Thus, where these incalcitrant taxpayers perceive a weak social contract, they call to question the legitimacy of taxes imposed on them by the law.”
While reiterating the resolve of the 36 State Governors toward delivering on their mandate as elected officials, the NGF Chairman affirmed that the Governors are “confronted with economic and socio-economic challenges beyond the fiscal space we have.
“This is what has caused us to aim for “ 'as close to even' development as we can deliver, a compromise non-beneficiaries will continue to fault us for. This is despite social intervention initiatives, programmes, and projects we have introduced to service various disadvantaged spectrums of the population including the poor, vulnerable and unemployed.
“Nonetheless, we must stand up to the trust placed in us as Chief Executives of our States, and devise a more equitable social minimum, sustainably funded to strengthen our social contract with the citizenry.
“To this end, this learning event and the tax-for-service (TfS) initiative is timely and strategic to our desire to achieve universal health coverage for all Nigerians. Health financing has remained a challenge not just for us as Government but for citizens who periodically pay huge sums out-of-pocket for healthcare. This is the situation, as less than 5% of our population is covered by any form of prepayment mechanism for healthcare. High out-of-pocket payments for healthcare have been proven to be highly regressive and a major barrier to seeking treatment for many.
“This redistributive measure, tax-for-service, is intended to bring about additional funding for healthcare, improve service delivery, promote trust in government and strengthen the legitimacy for taxes collected.
“As you subject the year-long research work done by the NGF Secretariat to a constructive discourse, bringing to bear your individual experiences and contextual State peculiarities, it is our expectation as a Forum that you avail us a fit for purpose implementation plan to run with, improve States’ IGR and deliver better healthcare to the people,” Governor Fayemi urged.
Speaking earlier, the NGF Director-General, Mr. Asishana Okauru explained that the event focused on policy issues around domestic financing in the country — from a sub-national perspective.
This year’s event is unique in the sense that it brings two of our workstreams together — combining both our work in IGR and primary healthcare.
“It is a product of our 5th IGR peer learning event organized in 2018 where the tax-for-service initiative was first presented as a model to mobilize domestic revenues and health financing in the country. This initiative seeks to improve health outcomes for the majority of Nigerians by incentivizing tax compliance and addressing the problems of the low revenue base, poor health allocation, and high out-of-pocket expenses.
“Today we will be discussing the result of a country-wide study on the feasibility of the programme for informal sector workers in Nigeria The baseline survey assessed tax compliance and the health care needs of informal sector workers and their willingness to pay taxes in exchange for free minimum healthcare.
“It also investigated perceptions about trust in government and their preferences in the design and implementation of the programme. These are very useful details that can inform the role of the primary institutions that are positioned to implement the programme. This is why for the first time, we are bringing together the heads of our tax authorities and insurance agencies in one room,” he noted.
In his presentation, Executive Chairman, Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami who noted that the event came at a “crucial moment of our nationhood,” observed that taxation remains the most veritable tool in addressing the imbalance between the ‘haves’ and the ‘have nots’ of the society.
“Beyond the use of taxation for balancing social-economic standing of citizens, it is the contribution that members of the society make in order for their leaders to provide them with social amenities in appropriate quantity and quality. In short, it is the price paid in anticipation of decent living conditions.
Tax-compliant citizens can legitimately expect their leaders to provide necessary amenities for a ‘good life’. This expectation is confirmed by the Constitution of the Federal Republic of Nigeria (as amended) in section 16(b) where it provided that “the State shall, within the context of the ideals and objectives for which provisions are made in this Constitution, control the national economy in such manner as to secure the maximum welfare, freedom, and happiness of every citizen on the basis of social justice and equality of status and opportunity.
“Governments at various tiers must, in view of the constitutional provisions, imbibe the culture of ‘value-for-money or, put in proper perspective, ‘value-for tax-money’. The citizens should not just hear budget figures but must, within their immediate living quarters, feel, see and experience the effects of tax revenue. At a time, ‘taxpayers’ money in action boards were dotting several development projects at different locations of one of the states. This, going forward, should be the norm and not an exception.”
While decrying Nigeria’s overdependence on revenue from crude oil, Mr. Nami argued that the source of oil revenue is no longer sustainable as the market for fossil fuel continues to deplete due to complications arising from the impact of the COVID-19 pandemic, the shift from fossil fuel to other cleaner sources of energy, rising cost of exploration, banditry, and oil theft, etc.
“In plain truth, the future of crude oil as a major revenue earner is very bleak. Going forward, taxation remains the only sustainable source of revenue anywhere in the world — Nigeria is not an exception.
To this end, he urged subnational Governments on the need to adopt the right tax policies that will ensure adequate funding for the much-needed social-economic infrastructures. Equally, this is important for governments, at all levels, to come together to fight tax evasion, touting, etc. which are negatively impacting tax revenue.
He also observed that “22 years since Nigeria started this democratic dispensation, none of our legislative assemblies has a tax committee; it is surprising. We must see taxation in its proper context such that all arms of government (legislative, executive, and judiciary) should accord it due attention,” the FIRS Chairman urged.
By Kehinde Akintola,