 Welcome back. It's still the breakfast and plus TV Africa away from today in history orbit looking at our first conversation for the day and indeed it is the finance bill and specifically the finance minister has hinted of Nigerians paying more tax come 2022 as the you know economy you know more stores recovery and joining us this time around to look at them all of that and make some sense and bring more insights to that is an economist Shagum Shokwiton. Good morning to you Shagum. Many thanks for joining us on the breakfast and plus TV Africa. Thank you for having me Justin. Good morning Nigerians. Yeah good morning to you. It is indeed our pleasure. All right the minister of finance Zainab Ahmed came out yesterday and she has hinted that we as Nigerians are likely to pay more tax or levies as it were come 2022 as the economy moves on the path of recovery. Okay first things first let me just ask you how that particular news hit you is it a step in the right direction or do you think we should be headed in some other direction? Well okay so for me generally speaking my my my perspective towards the tax issue is that nothing in life comes for free if you want development and you want progress then you have to pay for it. Most societies most developed societies and economies that we like to benchmark across the world finance development and growth and progress with taxes whether that be taxes taxation of individuals you know in terms of you know tax taxation on earnings payee or company income taxes you know for royalties that the government make you know excise duties all of that you know one way or the other the only way to finance development taxation so from a general philosophical point of view I have never shied away from the issue of taxes and I think we're not paying enough as a country to be honest but there's also the counter arguments and a counter position to that which is that two things one the economy as we all know is in a very terrible condition where recovering from a second recession in just five years inflation is terribly high disposable income and capacity of the citizens has been seriously impacted negatively result of all sorts of variables you know exchange rate management is not so good you know so so when you juxtapose the fact that we're not paying enough taxes with that then you have to realize that there has to be some portion on the part of government to be more creative in how it goes about generating that additional revenue that they need to fund development and to fund growth without killing the citizens basically so there are ways that they can go about this you know without necessarily increasing too much tax burden that perhaps may be already too high on some people you know so so it's a it's a very complicated conversation because there's also the issue of the tax net and how many people are actually paying taxes you know as citizens individual citizens or as corporate organizations and all that how many who are actually responsible for the taxes that we generate as a country you know it's it's nowhere near enough so so that I think that there has to be some balance to the conversation okay so let's also look at you know let's try to understand what all of this means for Nigerians I mean you know the ones I mean everybody those in the market every person with this additional tax the hints that we might be paying it what does this really mean well looking at the finance bill to be honest I haven't seen much in all of the analysis that is out there and I would encourage every Nigerian to just you know read it up a lot of these things are not really that complicated you know just read it up just Google it and you'll find a lot of information out there and from what I've seen I don't think that there is any significant direct increment in tax rates coming in in 2022 I think that what the minister finance minister is doing is just to prepare our minds for some of the measures that they're likely to introduce that will invariably impact on perhaps the cost of goods and services especially electronic services and as they begin to implement all of these policies so there's a close there's the close in the finance bill for example that gives the minister subject to the approval of the National Assembly powers to make regulations for the imposition administration collection remittance and distribution of areas of stamp duties and electronic money transfers collected between 2015 and 2019 fiscal years that is a very very strong provision that has you know serious implications for for people doing business especially in the in the e-commerce space so there's a possibility that the government can look at you and determine how much you owe in stamp duties and in levies table on transfers that have been made through your platform over a four-year the last four five-year period you know and then you know work with the with the concern companies on how to how to how to collect that money how you pay that money if that happens then the only way for those companies to survive also probably to look for how to increase the cost of the services that they're charging so that is just an example of one of the ways that you might find that we're paying more even if you're not paying more in terms of direct taxes you pay more for goods and services because people that are providing those services to you are paying more the government so that that's that's just an example there are a couple more and so like I said before there is no direct increment in any of the tax rates so what the finance bill has done is to creatively look for ways to reduce the leeway that companies corporate organizations have to avoid tax you know and all that it means a bit on on corporate across the various sectors but in terms of us as individuals I don't see anything that says that we're going to be paying more taxes directly but you know direct increments in tax rates okay but some quarters are concerned about you know the 7.5% vats for Facebook users zoom amongst others and you know some people are saying this is actually you know a new one there are a lot of school of thoughts and you know arguments are ending that some quarters are also saying following following the 7.5% on Facebook users and zoom some people are saying this is this might just be you know another way you know the president or this administration is paying back the people for the social media regulation not allowing that to scale through so it might just be difficult for a lot of Nigerians to have access online yeah that that that is one of the major things that we need to look out for in this bill because what it's what they've tried to do nice to give backing of the law to their effort to tax the social media space and the e-commerce space I don't know you know I don't know if it's necessarily in response to what has happened whether it's the answers or the Twitter ban you know I'm not so sure I think I think what has happened over the last two three years is that this government has been consistently looking for how to increase their revenue base and somebody has pointed them in the direction of social media you know the fact that all of a sudden huge volumes of transactions actually happening on Facebook huge volumes of transactions actually happening on Instagram on WhatsApp on Twitter you know people are actually doing trade they're actually making payments on those platforms and the government is looking at all of that saying hey this is escaping the tax net you know so I think what they're trying to do with this bill is to provide a backing the force of law to tax in you know all of that activity you know so TikTok as you all know TikTok is a new phenomenon and you know it's it's like a wildfire now people are making money you know people are really really making a lot of money on those platforms adverse revenues are happening there you know and the government is just looking at all of that money and looking for how to sink it's into some of it you know so I don't think it's about the social media regulation thing I think this is just you know the general direction that this government has been going over the last three to four years I think given the fact that we're coming out of recession and they're just looking for how to earn more money so that they can reduce borrowing or finance the deficit and all of that so the concern you know like I said for me my general philosophical approach is I don't have any problem with taxation but I think that the government has to be reasonable in how they go about implementing this thing so that the the impact and the effect is not too dramatic and doesn't then have a counter counterproductive impact on everything on society as a whole all right shaggo let's just look um let's take a cursory look at the nation's you know tax regime and administration well specifically when the minister was talking yesterday she mentioned let me just quote her he said that might be the need to revisit the antiquated stamp duties and capital gains tax for holistic reform by the parliament you know this is not the first time we've talked about stamp duties the federal government is seemingly reintroducing it and the capital gains tax these are taxes that we've had over time you know how why are we reintroducing them this time around them and how well did we do when we had them before now okay so so um let's start with the stamp duties um it's not being reintroduced because it didn't go away it's still alive and well we're still paying stamp duties on transactions that we do with our banks you know and as in as many channels as the government has the capacity to tax we're still paying those stamp duties what this bill is not going to do and what the the minister was referring to is the fact that now if you remember sometime last year i think it was there was this controversy between FIRS and NYPOS which regards to who is supposed to collect stamp duties yeah so what this bill has done is to now put um um control over stamp duties under the ministry of finance you know and FIRS is with the ministry of finance so i think what this bill is trying to do is just to use the law the provisions of the law and acts of the national assembly to resolve that controversy so as far as we are concerned as citizens continue to pay our taxes so the the battle over who is supposed to take that income yeah or or or administrate if you like is what this bill is now trying to resolve um so that's on the stamp duty issue then for the capital gains you know so what this bill has also tried to do like i said earlier i found it quite interesting is a deliberate um um uh approach within this bill to generally reduce as many relieves as many loopholes as there currently exists in existing tax tax laws with this bill so the capital gains issue slash capital allowances that people are entitled to to to earn or to to claim um in the process of their filing for their tax returns and all that what the bill has done is to take a toothpick and look through you know those allowances that are that that are available to to corporate organizations um SMEs the large corporates and reduce the percentages that they allowed for example there's a provision in in this in this act now that talks about yes you can end capital allowances on on your assets but those assets that are contributing there's a percentage of of of relief that you are allowed based on how much those assets are contributing to your profits to your profits so it's it's it's all very creative ways of just increasing how much the government can get and reducing the reliefs that people currently have there are other provisions for example that don't allow people now to carry over reliefs that have been earned in previous reporting periods so there's a provision that says that whatever reliefs that you earned um let's say in 2019 if you have not yet taken it into your returns for 2020 you can't carry it over so so those types of things are just what this this bill has been trying is trying to do to improve how much money that the government can get without necessarily increasing taxation in itself okay so i know that uh you know in the course of this conversation you have actually touched on uh this particular consent that i'm going to raise uh do you think that this bill is get towards addressing the issue of the policy gap between the federal government and the state government in terms of tax collection of course you know that the laws actually if you see the way the laws are state governors seem to or state governments seem to have a a hand in collection of tax so do you think that this this bill is get towards changing that narrative and allowing the federal government as a sole collector of all of the taxes personal income tax the vats and what have you okay no so so um the personal income tax has always been um under the um legal control of the state's government and you know so the various states land revenue services are responsible for collecting personal income taxes except in the federal territory where the federal government is responsible for that so that still remains the way it is uh but you are right what the bill what this bill is also trying to do you notice that the minister made reference to the court cases that are going on you know a lot of states have sued reba states very famously and then later joined by legal states and one other i can't remember which other state now so the federal government over the issue yeah over the issue of the vats and who is supposed to collect it and the minister made reference to those lawsuits and she said um they will continue to monitor the outcome of that but in the meantime this bill has actually now made it very categorical you know that uh vats due to the federal government will be collected by the federal land revenue service so so that there is no longer any ambiguity and indeed that has always been the case you know so i think there's a bit of political politics going on you know with this issue of that administration and what have you um there are certain categories of vats that are collectible by the federal government there are certain categories that are collectible by the state government so those that are that are due to the federal government what this bill has simply done is to now clearly state in a law so that there is no controversy anymore that those ones that are due to the federal government will be collected by the federal inland revenue service and nobody else so so what what this does is that whatever the outcome of that lawsuit or the lawsuits that are ongoing now there is now a law that defines clearly how vats will be administered so uh going forward that matter is settled by this bill all right chevrolet's talk about the issue of compliance you know that's one major setback when it comes to tax administration you know for 2022 uh niggens you know will have to pay some more tax whether or never see if they like whether they like it or not and it's also coming in the wake of uh you know this issue of subsidy removal how do you see the level of compliance come next year and uh what uh or just how do you think and uh maybe the federal government the state government you know can do you know to ensure that uh they have increased level of tax compliance um again you know that's another um interesting thing that this bill has tried to do so i see several clauses where there is now stipulated five-year prison sentences or five million error uh fines or both um in in one clause of the bill for government officials that fail or in fact anybody that fails to report any activity by anybody towards evading taxes so if you have any information that somebody is supposed to pay tax and is not paying it and you fail to report that or you collude with that organization in the price of trying to um um evade those taxes that are due to the government now this law is saying that you you could go to jail for as much as five years um there are a couple of other clauses like that that also provide prison sentences or tax evasion type of activities especially by um government officials and there's also another clause there that talks about remittance of all uh collectible revenues into the federal accounts um by government agencies and failing which there's a prison sentence now stipulated for whoever is you know caught in that process so the the bill is making a deliberate effort to provide consequences for tax evasion um however as with all other things in Nigeria we know that our problem has never really been a lack of laws or a lack of good policies or a lack of good legulations it's always been about the implementation execution and enforcement um so if somebody goes to some corporate organization they do a tax audit um or a review and they find that that company is supposed to pay 200 million naira taxes uh for a particular year um and then you know an official of that company then calls one of the auditing somebody that let maybe the person that led the auditing to a room and says guy you know and they do what we know that people do not just in Nigeria I think it's all over the world really you know and they have a conversation on how to reduce that amount to a certain figure you know what this bill is not trying to do is that if you are found out you go to jail for at least five years you know so so the only question is that will they be found out and if they are will there be enough uh political will will the wills of justice move adequately fast such that those consequences can be meted out and they now serve as a deterrence for others so if I get caught trying to help somebody evade taxes and then you know I go to court and we are joined the case for five or six or seven years and maybe 10 years later the case just somehow disappears and eventually struck out because maybe for lack of a diligent prosecution as the court will sometimes accuse the public prosecutors you know then what are we achieved so yes the law is has made provisions for stronger um uh enforcement of compliance to tax regulations and to get people to pay more taxes but I'm just worried about you know our ability to enforce you know those provisions given our antecedents as a country and a society for impunity all right okay um just as we proceed in the case of the conversation let's let's now stay with you know the implication of all of this now in a primary or basic economies economics requires that you cut down taxes to boost your economy not you know taxing a sort I mean taxing an economy that is already slowed down I don't want to use the other word dying economy but economy that is actually slowed down that's what you know basic economy requires that you know for government to you know grow high economy does need to reduce taxes and when taxes are reduced you would encourage you know investors foreign investors and you know all the factors in your economy so how do you make um what do you make of of this particular action and where does this leave Nigerians in terms of the implication and the impact however we want to look at it I know you said it doesn't really have you know such direct impact but where does this really leave the people well so so I think that um but we have to remember that taxation is just is a fiscal instrument is a fiscal policy instrument it's one of the ways that government tries to regulate what happens within the economy from the fiscal point of view revenue generation and then subsequent distribution of that revenue to drive development and all of that I yeah so I agree with you to a certain degree if you want to drive growth and you want to drive development especially in an economy that is recovering for a primary session it won't be a bad idea to use the fiscal instrument of taxation by reducing taxes especially uh from the point of view of those for the citizens whether it's by way of that by way of pay you know with holding taxes to increase disposable income the argument being that if you have more income in your pocket to spend then there will be more um consumption which will then drive investment um so from a just from a theoretical point of view yes that would work but in a situation where we don't have enough people paying taxes and I think that this this this point uh cannot be over emphasized I have always said that the the um um the obsession by various governments towards increasing taxation and tax rates and the number of taxes you collect and number of things you can tax um as against increasing the number of people that are paying taxes is one of the areas that governments have continued to fail we need to widen the tax net not increase tax rates so I absolutely agree with you I think governments can actually reduce some of these tax rates reduce the amount of taxes that each individual citizen is paying but find ways to bring more people to pay taxes we're simply we don't have enough to pay taxes because our informal economy is overwhelmingly larger than the formal economy so the government is supposed to be looking for a way to drag more of the informal activity to the formal sector you know for example I I actually you know this might not be popular opinion but I actually thought that the issue of the um um TIN tax identification number being required for account opening would not have been a bad policy because that is not increasing tax rates it's not increasing the tax burden on individuals but it will compare more people to pay taxes so that we can there are more people sharing the tax burden and the burden can then be lesser on each individual but I think there must have been an attempt to put that clause in the bill and there was some sort of an opera and then the government came out to clarify and say no you know TIN is not mandatory required for account opening but nothing like that in the bill and if you look at the bill indeed there's no provision like that I would have thought that that is the kind of thing that the government should be doing rather than increasing taxes and warning us that we're going to be paying more taxes in 2022 bring more people to pay these current taxes that we're paying or even use the taxes that we're paying all right we must say a very big thank you to you uh Shagu Shogwita I'm afraid that's as much as we can take on this particular discourse uh thank you so much for all your thought and all the inputs that you have made would you appreciate them always a pleasure thank you for having me all right it is the with the breakfast and plus TV Africa will take a very quick break and indeed the Omicron variant and of course the red list is still topical we're looking more in that direction in a moment during this again