Edo as most tax friendly state: The significance of MAN’sreport

The role of taxation in the socioeconomic development of any
country or society cannot be overemphasized. Taxation is the
foundation of the modern state because it is the primary
source of public finance. Taxation enables the government to
mobilize the needed resources to fund the provision of social
amenities and infrastructure towards the improvement of
social welfare of the citizens.
It’s necessary to point out, however, that while taxation is an
indispensable tool in the development of the society and the
sustenance of democracy, the manner it is administered is
crucial to the attainment of these goals. That explains why no
government can easily overlook the key issues of efficiency,
effectiveness and transparency of tax policy and
administration, even though it also keeps an eye on the
quantum of the revenues from taxation that go into
government coffers.
Thus, in a situation whereby tax assessment and collection,
including the utilization of tax revenues are not optimal, there
will be problems of disincentives to the private sector, which
will in turn lead to lower productivity, job losses and capital
flight.
A critical element in tax administration that could have
adverse implication on economy-wide growth and welfare is
the phenomenon of multiple taxation. Multiple taxation has
several dimensions, but it is typically the arbitrary, sometimes
unofficial imposition of exorbitant levies, taxes and charges on
individuals and businesses across different levels of economic
activities and jurisdictions.
Indeed, multiple taxation, no matter how it is executed, is akin
to extortion. It not only undermines the economic health of
the society, it also has moral implications, in the sense that
government cannot just be emptying people’s pockets
because it has the power. It distorts economic decision of
firms and households, it stifles initiative, it impairs the overall
operating environment, making it harsher for the private sector
to operate, and generate inequalities amongst citizens.
In fact, it has been established that one of the best ways to
create an enabling, clement environment for business and the
private sector and enthrone economic fairness amongst
citizens, is to make taxation friendly. This of course include
confidence building in the taxpaying public; it also relates to
the modus operandi of the tax authority, and more
importantly, how the tax revenues are deployed in terms of the
provision of quality infrastructure. Once this is achieved,
production costs and cost of doing business would be
significantly lowered and the profitability of firms boosted.
However, as we pointed out above, the efficiency,
effectiveness and transparency of revenue collection also have
an important role to play towards the creation of a sound
business environment that encourages the private sector to
willingly come forward to fulfill the civic duty of paying tax
without resort to coercion or legal processes by the
government.
It’s in the light of the foregoing that we must situate the
significance of the recent report submitted to the National
Economic Council (NEC) by the Manufacturers Association of
Nigeria (MAN). The 96-page report titled: MAN Presentation
on Multiple Taxation Across the Country at Various Levels and
its Effects on the Manufacturing Sector’s Productivity”
comprehensively surveyed the business environments of the 36
states of the federation, including the FCT. The report which
singled out Edo State as the most tax-friendly state in the
federation also showed that while majority of the states in the
federation impose many taxes and levies over and above the
approved, the 19 taxes approved by the Federal Government
as contained in the Taxes and Levies (Approved List for Collec­
tion) Act cap T2 LFN, 2004, in Edo State, manufacturers pay
altogether 16 taxes and levies.
To underscore the friendliness of the Edo State tax
environment, the report indeed, showed that while some states
imposed up to 97 taxes and levies paid by manufacturers,
others make manufacturers to pay up to 20 levies and taxes
and at the same time allow local governments to also impose
similar taxes. The report concluded that majority of the states
operate a very harsh tax environment that is characterized not
only by double/multiple taxation but by a cumbersome
process of assessment and collection and without
mechanisms for redressing inequities.
It should be noted that before the advent of the Comrade
Adams Aliyu Oshiomhole’s administration, arbitrary collection
of taxes and levies through illegal ticketing were common
place in Edo State. Often times, these activities were exacer­
bated by outright extortion because they were carried out by
groups and individuals not recognized officially as tax
collectors and revenues were hardly remitted to the treasury.
The result was that besides the fact that no revenue goes into
government’s coffers, considerable hardship was inflicted on
the citizens.
However, recognizing the critical place of taxation both for
augmenting internally generated revenue (IGR) and creating
the enabling environment for the productive sector of the
economy, the state government made it a cardinal priority to
put an end to the indiscriminate and haphazard multiple
taxation and the diversion of tax revenues to private pockets.
The government started by first, streamlining tax operations,
in terms of the rates, levies and fees charged by the
government throughout the state. This singular action alone
has the effect of creating a predictable and optimal
environment for business and drastically reduced the tax rate
payable. To reinforce this new direction in tax administration,
the state government proceeded to implement far-reaching
reforms covering the legal, institutional and regulatory
environment for tax assessment and collection.
The government not only overhauled the Edo State Internal
Revenue Service (EIRS) and staffed it with capable leadership
and hands under Chief (Sir) Oseni Elamah, as Executive
Chairman and an equally tested and experienced administra­
tor, but it enacted a new legislation, the Revenue
Administration Law, which gave strong legal backing to the
reforms in 2012. This law was undoubtedly a watershed in tax
administration in Edo State, underscoring the determination of
the people’s centred administration of Comrade Oshiomhole to
break the mold, including the repositioning and
professionalization of the EIRS.
On its part, the EIRS under the leadership of Chief (Sir) Oseni
Elamah have been working tirelessly to discharge its mandate.
It introduced laudable innovations and incorporated elements
of international best practices in tax administration in its
operations. It also sought ways to deepen the tax culture in
Edo State through concerted sensitization and public engage­
ment of the citizens of the state.
The EIRS, also implemented measures that included the mod­
ernization of the tax collection processes; the restoration of
confidence of the taxpaying public through a credible conflict
resolution mechanism (the Tax Assessment Review
Committee, TARC); the increase in tax compliance through
simplification of procedures, and the expansion of the tax net
through continuous update of the tax database. All these have
no doubt, improved performance in revenue collection quite
considerably, including lowering of the defaults rates and
under-remittance by over 80%. Overall, tax payment in Edo
State is now made easier, it’s a total break from the past in
which people paid taxes with tears, and can hardly see the
result in terms of concrete provision of amenities and
infrastructure.
Not surprisingly, as a consequence, the IGR was boosted from
N280 million monthly on the average to a peak of about N2
billion monthly in 2011. It has now stabilized within the region
of N1.5 billion monthly owing to the series of reliefs granted
to low income earners to cushion the effects of hardships
occasioned by some government’s policies, notably, the
removal of subsidies on petroleum products in 2012 and the
attendant inflationary pressures. Yet, there are huge potential
for growth in the coming years and the EIRS is not resting on
its oars.
There is no questioning the fact that the status of Edo as the
most tax friendly state in the federation is very assured. It’s
the culmination of the vision of the Comrade Governor and his
unyielding support to the EIRS. It’s important to mention at
this juncture that the positive verdict from MAN, as the
leading private sector body in Nigeria has punctured to
smithereens the partisan reading of some individuals that
negatively portrayed Edo State as a high tax jurisdiction just
to score political points. It is now clear that in Edo State,
taxation is not only optimal; it is purposeful and not
burdensome. MAN’s endorsement surely is an ample
testimony to the current administration’s strategic efforts to
make Edo State the hub of investors and entrepreneurs
operating in the commercial, industrial and other productive
spheres of the national economy through the instrumentality
of taxation.
Furthermore, the report has, indeed, said it loud and clear that
the reforms put in place in the last six years are working and
positively so. Commendably, it has provided the needed
encouragement to do more in terms of making the tax
environment friendlier through new innovations, not just for
the purpose of garnering accolades but for the singular
purpose of using taxation to build an enduring and productive
economic base for Edo State, as well as improving the welfare
of the Edo people.
The state government under the current administration is ever
more committed towards sustaining its developmental strides
through the judicious utilization of tax payers’ money.