President of the African Development Bank (AfDB), Akinwumi Adesina has revealed why Nigerians are among the highest implicit tax payers in the world, stressing that this is as a result of lack of basic infrastructure in the country.
Adesina, who explained that whereas, implicit taxes are usually not captured by government records, they’re normally borne by citizens who see the need to provide for themselves the basic amenities that government has failed to provide to get life and businesses going.
While speaking at the first National Tax Dialogue organized by the Federal Inland Revenue Services (FIRS) on Thursday, Adesina faulted successive administrations in Nigeria over the dearth of public infrastructures in the country, leading to Nigerians helping themselves with them.
Adesina, a former Nigerian Minister of Agriculture said government should embrace its responsibility rather than allowing Nigerians to provide their own electricity, road, security, water, among others.
He said, “We must also distinguish between nominal taxes and implicit taxes, Taxes that are borne but not seen nor recorded. Truth be told, Nigerians pay one of the highest implicit tax rates in the world, it is way higher than developed countries. To think of it, Nigerians provide electricity for themselves via generators, they repair roads to their neighborhood, if they can afford to, there are no social security systems, they provide security for their own safety, and they provide boreholes for drinking water with there own monies. That is incredulous in itself. Boreholes are not the way to provide water in the 21st century. Every household should have pipe borne water.”
The AfDB President further stated that the Small and Medium sized Enterprises (SME) lose an average of 10% of sales every year due to lack of infrastructures.
He said, “Take for example that 86% of small and medium size enterprises in Nigeria spend $14billion annually on diesel for generators. Nigeria’s companies lose an average of 10% of sales because they do not have access to reliable and affordable electricity. Government, overtime have simply transferred their responsibility to citizens. When government or institutions fail to provide basic services, the people bear the burden. It is a heavy implicit tax on the population.”
Adesina further explained that government however require a lot of resources to build the nation’s economy.
He said taxes play a very significant part of the government revenue. He also urged the government to focus on corporate taxes and ensure full compliance.
Adesina added that “it is crucial to ensure that the tax base expands. Given that over 60% of Nigerians are in the informal sector, priority should be to support measures to move a large part of this from informal sector, priority should be to support measures to move a large part of this from informal to formal sectors. The Government should focus a lot on corporate taxes, and ensure full compliance. But it is important to ensure that such taxes do not discourage investments. Profit shifting, base erosion and tax avoidance by multinational corporations form a huge part of ‘Africa’s missing taxes’, and account for a large share of the over $60billion illicit capital flows that Africa loses annually.”
It would be recalled that Adesina, 60, is the President of the African Development Bank(AfDB).
He previously served as Nigeria’s Minister of Agriculture and Rural Development. Until his appointment as Minister in 2010, he was Vice President of Policy and Partnerships for the Alliance for a Green Revolution in Africa.