Our Critics Need A Rethink


The Special Adviser to Lagos State Governor on Taxation and Revenue, Mr. Ade Ipaye,  replies critics of the state’s tax policy and why the policy must remain. He spoke with  newsmen recently.

The former Minister of State for Defence, Mr Ademola Seriki, has declared his intention  to run for the office of Governor of Lagos State. He says his main mission is to rescue  the citizens of the state from the stiff tax policies of the current government. How do  you react to this?
Well, I think Honourable Seriki needs time to settle down and study the situation  properly. This tax issue requires a close study and deep analysis. I can assure you that  he will abandon that line of attack once he has things in the right perspective. To start  with, what is a stiff tax policy? Well over 90 per cent of taxpayers in Lagos State pay  personal income tax, stamp duties and capital gains tax. Other sundry taxes and levies  are not nearly so prevalent. The major ones I mentioned are charged by federal law and  the rates are the same throughout Nigeria. Lagos State Government has never and cannot  even increase the rates. Rather, we charge less than we should in many circumstances. The  difference between Lagos and other states is that we extend the tax net to see that more  people are covered and we achieve greater efficiency in our tax administration. Where it  was only the teachers, civil servants, doctors, journalists and others in paid employment  that were paying their taxes regularly, we now get people in the informal sector to play  their part also. Then we get those companies and other employers who deduct monthly but  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 traders…
Wonderful! What do we currently get from petty traders? Something in the region of N2,500  per annum, if at all. That is less than N7 per day or N210 per month. What Hon. Seriki  may not know is that most teachers, nurses or junior civil servants pay more than that  even though they earn less than the petty traders. The tax rate at the lower levels is  between five and 10 per cent. So, if you have teachers in private schools all over the  place earning 10,000 per month and paying their tax according to law, or cleaners,  hospital attendants, nurses, drivers, gatemen etc, are you also going to give exemption  certificates to all those? There is something called equity in tax systems and it is an  essential factor. So to do the exemption thing properly you have to determine the level  of people you propose to exempt and apply it to everyone at that level, irrespective of  occupation. It is not feasible to just say petty traders. Who is a petty trader? When  does trading cease to be petty? You see, in public administration specifics are required  if you want to develop and implement a policy. Vague, open ended statements won’t do at  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 don’t  charge or collect companies income tax, we don’t collect stamp duty or capital gains tax  from companies. All we ask of them are taxes they collect on our behalf from their  employees, directors or contractors. As I said, the rates are fixed by federal law and  made applicable throughout Nigeria. The only thing we can be accused of is following up  and recovering what is due to government. Now if anyone tells you that they won’t do  that, please ask them how they are going to run the government. When companies were  complaining of multiple taxation, we were the first state government to sponsor a bill to  harmonise the levies chargeable, issue a list that everyone can verify, set rules, stamp  out touting and arbitrary charges and make definitive legal provisions to guide tax  collection and administration. Even before the law was passed, we started working with  Local Government Authorities to ensure that only legal levies were charged and duly  authorised officials and agents were employed in tax administration. We also set up a  Revenue Complaints and Information Unit which has assisted thousands of Lagosians,  individuals and companies get information and to resolve their tax related issues.

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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 machinery  is only as good as its enforcement capability. Not many people would want to pay tax  voluntarily. Equity dictates that if you deduct from some people’s salary even before  they lay their eyes on it, you should be equally diligent in pursuing others who are also  enjoined by law to pay. When we have issues with companies, it is either that they were  not deducting taxes that they should deduct or they were deducting and not remitting to  government. Either one is an illegal activity. Before we lock up an organisation, we  would have served all the notices required by law and given all the opportunities allowed  for the company to express dissatisfaction with the assessment or to file an appeal. We  always have the proof of service, and that is why LIRS has not been convicted for illegal  closure yet. In fact you should wonder how all these cases are quietly resolved. Other  states have been coming to us to learn how we achieved this level of tax awareness and  efficiency in Lagos and they see the developments taking place as a direct result of  that. This is acknowledged worldwide as a positive trend that will pull us up from the  underdeveloped level we have been in all this while. So, when anyone stands up to say  that he won’t, as governor, enforce tax collection or that he won’t bother with the  informal sector, you need to ask how exactly he proposes to run the government. By  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 taxpayers  now and then; so we are continually refining our system. We promptly attend to complaints  and we remain committed to seeing that everything is done properly, but we won’t ever  play politics with taxation. The contributions of even the smallest taxpayers have been  their symbol of participation. Every taxpayer becomes part of government and is able to  hold government accountable because we are spending his money and he is fully entitled to  ask how. All these good things the Fashola government is known for happened because more  Lagosians are now alive to their tax responsibility and contribute towards increasing the  internally generated revenue. You will see that more people will vote in the next  elections because they want to have a hand in deciding who will take and spend their  money on their behalf. That is how taxation promotes democracy. As government has more  money to spend on capital projects, more people get gainfully employed, more money  circulates in productive sectors and the pace of economic development increases. This is  apart from the infrastructure and public services delivered, which has made Lagos the  envy of other states. All over the world, taxation is the key to development. If in year  2010, anyone suggests that the way forward is to overlook defaulters and grant exemption  to a large section of taxpayers, then you should think carefully about the person’s  motive because it is contrary to all the accepted principles of public administration and  economic management.

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