Taxation and accountability in Lagos state

Taxation is a difficult issue for any government, but most especially for governments in resource-rich nations whose citizens do not have a culture of paying tax.  The situation is also compounded by the corrupt and rapacious nature of the leadership in such resource-rich countries where accountability is absent and exiting taxes are whittled down or completely dismantled to prevent the development of a civic culture where the citizens not only pay tax but also strongly demand accountability from the leadership on how tax-payers’ money is utilised.

This is the context in Nigeria and Lagos state in 1999 when the then governor, Bola Tinubu, decided Lagos needed a different model of governance – a model where the people would help fund their government and the government will, in turn, be accountable to the people from whom it draws its resources. Lagosians grudgingly accepted the charge and over the last 18 years, the IGR of Lagos has risen from a mere N600 million monthly in 1999 to a declared figure of N34 billion in 2017.

Consequently therefore, at a time when most of the states of the federation are battling with bankruptcy and unable to meet basic responsibility such as payment of workers’ salaries following the decline of oil-derived federally distributable revenue, Lagos state is soaring high outpacing economic growth in other parts of the country, as the state’s non-oil revenues help sustain increased investment in infrastructure and other social amenities. In 2016 alone, the Lagos state government declared that it raked in N287 billion in internally generated revenue. This is well above the total budget size of more than 20 of Nigeria’s 36 states. Going by the average monthly revenues in 2017, the state should have generated well above N400 billion. And, if the revelation by the governor that only about 600, 000 out of about 22 million Lagosians dutifully pay their taxes is true, then there is still room for improvement and with a robust tax enforcement mechanism, Lagos could still raise enough tax to enable it transform the state to a megacity as dreamed by key stakeholders in the state since 1999.

However, rather than intensify its tax compliance advocacy and strengthen its enforcement mechanisms, the state government  chooses to introduce new round of taxes, charges and other sundry bills that is turning Lagos into one of the most difficult places to live and do business in Africa. The increase of the Land Use Charge by about 400 percent (now reduced by 50 percent after intense protest), the introduction of borehole and other permits and a proposed increase in vehicle registration and licensing rounds, ultimately denied by the Lagos state government, prove the point. Besides the sheer impunity and hubris behind the move, the huge increase and new raft of taxes and charge will create more problems for the state, cripple businesses, deepen poverty and helplessness, and ultimately prove uncollectable.

But just as the Lagos state government is increasing the tax burden on residents of the state, it has been failing in its duty to account for the taxes so far collected. Although it has its account audited and it produces financial statements for each year, its financial statements are notorious for being opaque, containing very little useful information. Equally, the state government, despite many court judgements, has refused to respect the freedom of information law by releasing detailed information into how it uses tax-payers’ money.

That cannot be the action of a transparent government. It cannot continue to collect tax-payers’ money while refusing to account for same. That is not in consonance with the contract entered into between the government and the people in 1999. It stands the whole idea of the social contract on its head. Lagosians must demand for new terms of engagement that sufficiently respects the tax-payer and compels the government to render account of the monies collected.