27th September, 2010
The Special Adviser to Lagos State Governor on Taxation and Revenue, Mr. Ade Ipaye,Â replies critics of the state’s tax policy and why the policy must remain. He spoke withÂ newsmen recently.
The former Minister of State for Defence, Mr Ademola Seriki, has declared his intentionÂ to run for the office of Governor of Lagos State. He says his main mission is to rescueÂ the citizens of the state from the stiff tax policies of the current government. How doÂ you react to this?
Well, I think Honourable Seriki needs time to settle down and study the situationÂ properly. This tax issue requires a close study and deep analysis. I can assure you thatÂ he will abandon that line of attack once he has things in the right perspective. To startÂ with, what is a stiff tax policy? Well over 90 per cent of taxpayers in Lagos State payÂ personal income tax, stamp duties and capital gains tax. Other sundry taxes and leviesÂ are not nearly so prevalent. The major ones I mentioned are charged by federal law andÂ the rates are the same throughout Nigeria. Lagos State Government has never and cannotÂ even increase the rates. Rather, we charge less than we should in many circumstances. TheÂ difference between Lagos and other states is that we extend the tax net to see that moreÂ people are covered and we achieve greater efficiency in our tax administration. Where itÂ was only the teachers, civil servants, doctors, journalists and others in paid employmentÂ that were paying their taxes regularly, we now get people in the informal sector to playÂ their part also. Then we get those companies and other employers who deduct monthly butÂ fail to remit to government to do so. If that is harsh, then what do you recommend?
He has also recommended tax exemption certificate for all petty tradersâ€¦
Wonderful! What do we currently get from petty traders? Something in the region of N2,500Â per annum, if at all. That is less than N7 per day or N210 per month. What Hon. SerikiÂ may not know is that most teachers, nurses or junior civil servants pay more than thatÂ even though they earn less than the petty traders. The tax rate at the lower levels isÂ between five and 10 per cent. So, if you have teachers in private schools all over theÂ place earning 10,000 per month and paying their tax according to law, or cleaners,Â hospital attendants, nurses, drivers, gatemen etc, are you also going to give exemptionÂ certificates to all those? There is something called equity in tax systems and it is anÂ essential factor. So to do the exemption thing properly you have to determine the levelÂ of people you propose to exempt and apply it to everyone at that level, irrespective ofÂ occupation. It is not feasible to just say petty traders. Who is a petty trader? WhenÂ does trading cease to be petty? You see, in public administration specifics are requiredÂ if you want to develop and implement a policy. Vague, open ended statements wonâ€™t do atÂ all.
But he says that several companies have relocated from Lagos because of tax.
Again, the question is how many and why? He should at least know a few. You know we donâ€™tÂ charge or collect companies income tax, we donâ€™t collect stamp duty or capital gains taxÂ from companies. All we ask of them are taxes they collect on our behalf from theirÂ employees, directors or contractors. As I said, the rates are fixed by federal law andÂ made applicable throughout Nigeria. The only thing we can be accused of is following upÂ and recovering what is due to government. Now if anyone tells you that they wonâ€™t doÂ that, please ask them how they are going to run the government. When companies wereÂ complaining of multiple taxation, we were the first state government to sponsor a bill toÂ harmonise the levies chargeable, issue a list that everyone can verify, set rules, stampÂ out touting and arbitrary charges and make definitive legal provisions to guide taxÂ collection and administration. Even before the law was passed, we started working withÂ Local Government Authorities to ensure that only legal levies were charged and dulyÂ authorised officials and agents were employed in tax administration. We also set up aÂ Revenue Complaints and Information Unit which has assisted thousands of Lagosians,Â individuals and companies get information and to resolve their tax related issues.
What of companies being closed down by LIRS for tax default?
All over the world, countries are only as good as their tax systems and the tax machineryÂ is only as good as its enforcement capability. Not many people would want to pay taxÂ voluntarily. Equity dictates that if you deduct from some peopleâ€™s salary even beforeÂ they lay their eyes on it, you should be equally diligent in pursuing others who are alsoÂ enjoined by law to pay. When we have issues with companies, it is either that they wereÂ not deducting taxes that they should deduct or they were deducting and not remitting toÂ government. Either one is an illegal activity. Before we lock up an organisation, weÂ would have served all the notices required by law and given all the opportunities allowedÂ for the company to express dissatisfaction with the assessment or to file an appeal. WeÂ always have the proof of service, and that is why LIRS has not been convicted for illegalÂ closure yet. In fact you should wonder how all these cases are quietly resolved. OtherÂ states have been coming to us to learn how we achieved this level of tax awareness andÂ efficiency in Lagos and they see the developments taking place as a direct result ofÂ that. This is acknowledged worldwide as a positive trend that will pull us up from theÂ underdeveloped level we have been in all this while. So, when anyone stands up to sayÂ that he won’t, as governor, enforce tax collection or that he won’t bother with theÂ informal sector, you need to ask how exactly he proposes to run the government. ByÂ borrowing, doing business or printing money?
So the Lagos State government is unrepentant about its tax policy?
Certainly! Perfection belongs to God, so we will have problems with individual taxpayersÂ now and then; so we are continually refining our system. We promptly attend to complaintsÂ and we remain committed to seeing that everything is done properly, but we wonâ€™t everÂ play politics with taxation. The contributions of even the smallest taxpayers have beenÂ their symbol of participation. Every taxpayer becomes part of government and is able toÂ hold government accountable because we are spending his money and he is fully entitled toÂ ask how. All these good things the Fashola government is known for happened because moreÂ Lagosians are now alive to their tax responsibility and contribute towards increasing theÂ internally generated revenue. You will see that more people will vote in the nextÂ elections because they want to have a hand in deciding who will take and spend theirÂ money on their behalf. That is how taxation promotes democracy. As government has moreÂ money to spend on capital projects, more people get gainfully employed, more moneyÂ circulates in productive sectors and the pace of economic development increases. This isÂ apart from the infrastructure and public services delivered, which has made Lagos theÂ envy of other states. All over the world, taxation is the key to development. If in yearÂ 2010, anyone suggests that the way forward is to overlook defaulters and grant exemptionÂ to a large section of taxpayers, then you should think carefully about the personâ€™sÂ motive because it is contrary to all the accepted principles of public administration andÂ economic management.