Monthly Archives: April 2017

TAX COLLECTION IN NIGERIA AND THE NEED FOR CAUTION AND COMMON SENSE – Taxation cannot bring Prosperity only Economic Growth will.

The Federal Minister of Finance, Kemi Adeosun has been all over thSCoUCSePe media lately trumpeting the government’s increasingly assertive drive to collect taxes. The Vice President has said as much in recent interviews and he even went further to announce the plan to increase VAT to either 7.5% or 10% in the next couple of years.

Part of the justification for this newly found aggression in tax collection is their statistics that Nigeria has one of the lowest Tax to GDP ratio in the world and that only about 12% of our adult population pay taxes.

On one hand I understand the need for the government to collect taxes, after all, we have been told by Benjamin Franklin that there are only two certainties in the world; Death and Taxes. But I have a problem with the one-sided use of statistics by this government. If we have one of the lowest Tax/GDP ratio in the world; how do we rank in poverty rate amongst citizens, healthcare provision, road infrastructure or even power supply. We hardly hear about these other pertinent statistics. Simply keenness at collecting taxes, without any visible or discernible corresponding positive effects of government on the people will be futile and lead to oppressive taxation. What have they used the taxes they already collect for? What evidence is there in the lives of Nigerians that the government is alleviating any of the chronic maladies that afflict our country? You cannot be collecting taxes and not make people’s lives better and expect more of the people to pay taxes.

Speaking recently to somebody close the government in Lagos state; he told me that the state government have collected more taxes in the past 18 months than at any other period. When I asked why; he said he thinks it is because people are increasingly seeing what the state government is doing with the taxes collected, hence more people feel morally and psychologically agreeable to paying taxes. It is true that all over the world, that the more people pay taxes the more their expectation of performance by the government will be. The more people see the bejnlk;nefit of government actions, the more accepting they will be of some form of taxation or another.

Over the decades, governments have been collecting taxes in Nigeria at all levels. Yet if you want to set up a small business; you have to generate your own electricity, build borehole to supply your own water, hire security guards to provide security and use private hospitals when you are sick as well as send your children to private schools for better basic education. So what exactly is the government doing for you? What is the government providing that will justify paying taxes?

So my advice to Ms Adeosun and her colleagues in this government is to increase their deliverables. Let the effect and positive impact of the government be felt by Nigerians and paying taxes will become an acceptable norm in Nigeria. Giving the choice of paying taxes and in return getting a stable power supply, pipe borne water, effective security by the police etc; most Nigerians will gladly choose to pay their taxes. But any drive to collect more taxes by a non-performing government of any party will fail.

One of the financial benefits of winning the hearts and mind of the citizens this way is that the cost of tax collection will become very low indeed as most people voluntarily pay their taxes. Enforcement and litigation to get taxes paid increases the cost of collection and makes less money for the government. Spending N10,000 to collect N15,000 in tax is less profitable than spending just N500 to collect same. So the more willing people are to pay taxes, the better the net revenue for the government.

Naira-Nigeria_currencySo rather than putting most of its focus on aggressive tax collection; the government should begin to deliver for the people. Produce quarterly reports of how taxes collected have been spent. What additional steps have been taken to making the lives of Nigerians better in a visible way. Then tax collecting will become a lot easier as people will begin to see a correlation between their taxes and infrastructure growth and social development in the country.

Any bellicose tax collection posture on businesses in Nigeria will ultimately affect the people. As President Reagan declared years ago; “You can’t tax business. Business doesn’t pay taxes. It collects taxes.” It is the customers and citizens that pay the taxes ultimately from their patronage.

No nation can tax itself into prosperity. Real prosperity comes when the national productive output grows not when people pay more taxes or the government collect more taxes. Economic growth is what prospers a nation and not just tax collection. That is why Winston Churchill advised after years in government that “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” This will never work.

In the United States, Justice George Sutherland said, in the majority opinion for the Carter Coal case that “One who does a thing in order to avoid a monetary penalty Taxpolicybig4does not agree; he yields to compulsion precisely the same as though he did so to avoid a term in jail.”   Not agree with the concept of paying taxes for non-existent public services is the root of all tax evasion and tax avoidance schemes. At least it is if the tax rate is reasonable. Most people agree they need to pay some form of tax for better public services. But what happens if there are no public services, yet tax is demanded. Most people will try to avoid paying it. This is the challenge the Nigerian government face. Convincing a population to pay more taxes for public services that has been decimated and destroyed. This administration has collected more taxes than its predecessors in the past two years; yet Nigerians feel poorer, malnourished, abandoned and victimised than ever before. So pushing these same people to pay more for invisible outcomes will be a futile venture.

Winning hearts and mind will be necessary to create more voluntary tax paying population. And the delivery of better services is crucial to ensure this happens. I will advise the federal government to deliver first for the people instead of chasing taxes from them all over the world. The avenues and legal tricks to hide and avoid taxation are endless. The government will do well to creating a willing population first, that way everybody wins.

We know the government need money to implement its programme, but we have to see how the currently collected taxes is making a positive difference and not being swallowed up in inefficiency and graft. It will be like throwing good money after bad. The government need to convince Nigerians of the efficient use of revenues it currently collects before people will be eager to support with more funding through taxation and other means.


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THE NIGERIAN SENATE AND VOLENTI NON FIT INJURIA – A Legal Analysis of Sen. Ndume Suspension.

Volenti non fit Injuria in a Latin phrase that means to one who volunteers, no harm is done’. Volenti is an established common law doctrine which states that if a person willingly places himself in a position where an harm can result; knowing that some degree of harm might result, they are not able to bring a claim against the other party in tort. Volenti has a complex application that requires specific facts as evident in case law. I will however restrict myself to a narrow perspective that applies to the case in question in this article.

Volenti only apply to risks that are considered reasonable in the circumstance. So a boxerSeal_of_the_Senate_of_Nigeria.svg that enters a boxing ring accepts being punched by the other boxer as that is the nature of boxing. The specific consent in such a case, overrides the protection of common law on assault and battery. Therefore, no claim for assault or any crime can be brought against the other boxer. But if the other boxer brings a baseball bat into the ring and uses it to attack, then that is actionable breach as the bat is not an acceptable or recognised boxing tool; hence it is an unreasonable act that Volenti cannot protect from.

Volenti also known as the voluntary assumption of risk, is a total defence in Tort. This means if proven, it fully exonerates the defendant relying on it. For example, consenting to a medical procedure means you cannot sue the doctor for trespass on your person afterwards.

There are usually two main elements in volenti. Firstly, that the claimant was fully aware of all the risks involved in an activity, including both the nature and extent of the risk.  Secondly, the claimant waived (either expressly or impliedly) all rights to claim damages. For instance, signing a membership contract of a club, could be considered an implied acceptance of the rules governing the club as long as the consent (signing of the contract) was given free and voluntary and not under duress. If there is a relationship between the parties that will make free consent doubtful (such as in the case of an employer and an employee), due to power disparity; then volenti may not apply; but Contributory Negligence is a possible way to resolve this.  This mitigates damages due to the contributory actions of the claimant to the situation that caused the harm.

ndume-1-650x400From the foregoing therefore and given the specific facts in the Senator Ndume’s suspension by the Senate of Nigeria; it is my submission that the suspension (however perverse it is) is legal. Every Senator signs to a code of conduct and acceptance of the rules of the Senate on their first day on the job. This fact may hold Sen. Ndume volens with regards to the internal rules of the Senate and its provision. Ndume accepted to be bound by the rules of the Senate. That is a voluntary assumption of risk.  As long as due process is followed, the Senate can rely on volenti to defend their action in this case.

Some of the cases cited by respected legal luminary Femi Falana SAN, contained peculiar facts that defers from this case; thus they are not suitable authority. For instance, in the case of the suspension of Dino Melaye and group by the Dimeji Bankole leadership of the House of Representatives, due process was not followed as they were not given opportunity to defend themselves. But in this case; Senator Ndume appeared before the Ethics Committee to respond to and defend his actions. And it was the recommendation of that committee that the Senate acted on to suspend him.

What can be challenged however is the length of the suspension. Any action by the Senate must still be judged as reasonable in law and equity. Six months suspension may be considered excessive and denying the people of Southern Borno a voice in the Senate for six months requires a more serious breach than those committed by Ndume. Hence, the Senate could be judged to have acted unreasonably by suspending him for six months. In England, since the introduction of the Law Reform (Contributory Negligence) Act 1945, the courts have been less willing to make a finding of volenti preferring to apportion loss between the parties rather than taking an all or nothing approach. This is why challenging the length of the suspension may be a better strategy than challenging the suspension itself.

It is my view that a seven to fourteen days suspension will be appropriate in this case. Please note that this is just an impartial legal analysis and not an endorsement of the actions of the Senate. Personally, I see nothing wrong in what Ndume did and there should not be any suspension at all. But as an outside observer, the Senate did not overreach its powers by suspending the Senator; although the length of the suspension seems unreasonable and therefore specifically justiciable.

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