By Louis A koko, Esq. (PhD)

Taxation in any country, be it developed or developing is a multidisciplinary subject and its impact on all stakeholders, be it direct or indirect are real, practical and has implications in the legal, political, financial and economic dimensions of the country and on the tax payers. So, it is pertinent that any discussion relating to the current tax reform bill before the National Assembly should not be narrow and restricted to isolated aspects of it ( legal and statistics) but to its entire ramifications on the target persons that will bear the incidence in relation to the general economic environment in which the tax reform is expected to operate .

In this case, Nigeria. Having stated the above, may I ask, if there is need for comparison of the tax regimes in other countries with that of Nigeria? In my opinion, it is fruitless and mere academic because the effects of taxation on the tax burden bearers are far different between countries even when rates are the same.

The reasons are not far fetched and resides in the domain of economics and finance and not law, statistics and politics. In Economics, apart from the formal tax rates imposed by legislation, there is what is called implicit tax. It is the indirect tax or burden imposed on individuals and businesses as a result of government policies and regulations. In practical terms, it means government failure in mitigating socioeconomic issues in the country which imposes extra financial burden on citizens apart from the formal tax payments. In Nigeria, there are plethora of such government failures too numerous to mention but includes:poor roads, absence of public utilities like water and electricity.

Others are excessive inflation rate of goods and services as a result of poor economic management, high tariffs for imported goods and unnecessary government regulations that takes funds away from citizens. If comparative analyses of countries’ tax regimes are necessary, I would recommend that the starting point should be the comparison of the socioeconomic welfare of the citizens in the target countries before comparing the tax rates. Figures do not say much about the real economic effects of the tax rates on the welfare of citizens. It is worth noting that tax reduces the disposable income of the tax payers and every reduction in disposal income also result in proportional decrease in the welfare of the tax payers.

It is worse when the tax payers are made to pay more, while the public goods which the tax revenue ought to provide are either decreasing or not available. If tax rates are increased, yet the citizens still drive cars on bad roads which increases the frequency of car maintenance. If tax rates increases, yet citizens are still drinking untreated borehole water which can cause communicable disease. If tax rates increases and the tax payers are faced with unending hyper inflation of goods and services. Of what use is the increase? I don’t know if there are frequent power outage in United Kingdom, USA, Canada, Lesotho, etc. I don’t know if the trunk A roads in these countries are death traps and I don’t know if inflation rates in these countries are the same with Nigeria.

If they are not, I humbly submit that there is no empirical reason why anyone should compare the tax regimes in Nigeria with that of any country, especially when the citizens of that country enjoys a higher standard of living and have social safety nets for vulnerable citizens and there is more public accountability and transparency in government unlike Nigeria that is a top contender for the highest ranking in corruption perception index.