The President of the African Development Bank (AfDB), Dr. Akinwumi Adesina Tuesday said despite the country’s low tax to Gross Domestic Product (GDP) ratio, the federal government must exercise restraint in continuous tax increase.
Speaking at the opening of the 51st Annual Conference of the Institute of Chartered Accountants of Nigeria (ICAN), with the theme: “Trust in Governance”, in Abuja, he said while tax to GDP remained relatively low, it was no excuse to keep raising taxes.
He argued that when citizens bear the burden of high implicit taxes and governments or institutions fail to provide basic services, trust in governance would be eroded.
He said a distinction must be established between nominal taxes and implicit taxes — taxes that are borne by the people but are not seen nor recorded.
The AfDB president further called for lifestyle audit for leaders, adding that when citizens see their leaders living transparently, being sensitive, not lavish in lifestyle but delivering good governance, they will trust governments.
Adesina said, “While tax rates are relatively low in Nigeria, it simply is not an excuse to keep increasing taxes.
“Take the case of Norway for example. Its tax-to-GDP ratio is 39 per cent. Singapore’s tax-to-GDP ratio is 13.2 per cent. And Nigeria’s tax-to-GDP is 6.1 per cent. It is easy to make the comparison and say Nigeria needs to raise its taxes to similar levels as in Norway or Singapore.”
He said: “But also consider the following – In Norway, education is free through university. In Singapore, a country that had only 1/3 of Nigeria’s per capita income at its independence in 1965, today has 100 per cent access to electricity and 100 per cent access to water.
“While progress is being made the challenge, however, is that in many parts of Nigeria, citizens do not have access to basic services that governments should be providing as part of the social contract.
“People sink their own private boreholes to get water. They generate their own electricity oftentimes with diesel. They build roads to their neighbourhoods. They provide security services themselves.
“These are implicit taxes, borne by society due to either inefficient government or government failure. As such, we must distinguish between nominal taxes and implicit taxes — taxes that are borne by the people but are not seen nor recorded.
“It has become so common that we do not even bother to question it. But the fact is governments can simply transfer its responsibility to citizens without being held accountable for its social contract obligations.”
He pointed out that to build trust with the society, governments must fulfil their part of the social contract, and citizens must also pay their own fair share of taxes adding that there must be mutual accountability.
He stressed the need to enforce social contracts adding that participatory governance demands open and transparent governance.
He said governments should be opened up and allow the citizens a right to know how public finances are being used.
He said, “This is why I believe that we must develop a ‘People’s Index of Governance’ with citizen accountability forums.
“But when people feel that their resources are mismanaged or being used for opulence, widening the gap between the leaders and those they are leading, it builds distrust and despondency, which then permeates the fabric of society.
“Leaders must not only be accountable; they must live simply. Power is not judged by wealth, but by transforming lives of people. To earn the trust of people, we must create people wealth, not simply personal wealth.”
However, ICAN President, Mrs. Comfort Eyitayo, in her presentation, said trust was the ultimate currency in the relationship that all institutions companies and brands, governments, NGOs and media build with their stakeholders.
She noted that the theme was not just central to reshaping governance across political, public and corporate institutions, but also represented the bedrock for achieving a successful union between prosperity, people and planet.
She said with business, political and social environments changing rapidly, it became imperative to rethink governance against the backdrop of the new normal.
She said digital disruption, democratisation of knowledge and ubiquity of information have positioned people at the vantage of the global scene, with access to real-time information and unprecedented capacities to verify the authenticity of such information.
She said these have further exposed leadership failures and raised awareness on the lack of transparency and accountability that characterises some public and private institutions.
She said the impact and management of the COVID-19 pandemic have further weakened the level of trust citizens of some economies have on their leaders to respond appropriately and promptly to unanticipated events.
She said the pandemic revealed leaders, corporates and economies level of unpreparedness to adapt to unpredictable socio-economic dynamics.
Eyitayo added: “The pandemic has been christened a stress test for trust in government.
“It is trite to state that social, commercial, economic and political progress would remain forlorn if Leaderships perception of the right thing differs from the expectations of the led.
“The led would continue to make concessions if Leaders fully discharge their part of the social contract. Restoring trust in governance benefits all in diverse ways and creates a society where there is increased social order, labour harmony, inclusive growth and development and enhances international trade, commerce and Foreign Direct Investments (FDIs) as well as boost diplomatic relationships.”
James Emejo in Abuja