In advanced economies or industrialised states or high-income countries where saving and taxes collected are high, it is because of their high level of income and development. Willingness to pay tax is high, though they still have incidences of tax avoidance and tax evasion. The citizens see their taxes at work. The basic necessities of life have been and are being provided and maintained with public funds generated through taxes.
The use of technology in tax collection; the small insignificance of the informal sector and the fact that those economies are dealing with an enlightened population make coverage of areas of tax collection easier in advanced economies. Since the tax rates are tied to income, it is not surprising that the values of tax returns are high and form a significant part of the revenues. Taxpayers in Nigeria, like their counterparts in other African countries, are the most taxed.
The citizens of most African countries rely on personally dug wells and boreholes for potable water for drinking and domestic use. People pay through their sweat to generate household electricity due to epileptic nature of public power generation and distribution services. Costs of food remain relatively high in many of the countries when compared with prices of food in advanced economies. All these payments take a large proportion of the poor pay of the workers.
Hopefully, the new tax reforms committee set up by the President is conversant with these implications. The government had already explained that it is more concerned about widening the tax net than increasing tax rate. The committee, in addressing the issues at stake, should consider compliance of our tax collection processes and procedures with the canons of taxation and how to comply in areas of disagreement.
One is curious about the continuous reminder by the World Bank that some $800m is available to meet subsidy palliative expenses. The World Bank, in some of its reports and lately in the June 2023 report on Nigeria, explained that the country’s debt servicing consumed more than 80 per cent of the revenue and when added to personnel cost, exceeded the revenue.