In this article, MARK ITSIBOR x-rays the outcome of the recently concluded 7th ATAF general assembly and concludes that African nations must engender public confidence by rethinking governance to elicit willingness of the citizens to pay tax

As it stands, Nigeria and indeed, many African countries have been very innovative and resilient in their mission to mobilise domestic revenue through taxation. That has obviously raised the non-oil revenues of Nigeria, but not to a significant extent.

Like other nations, Nigeria that hitherto relied largely on mono-products like oil revenue has been forced to think out of the crude oil box. The outbreak of COVID-19 pandemic and economic shocks from the ongoing Russia/Ukraine war are some of the external factors that have exposed the vulnerabilities in most countries of the continent.

Expectedly, African tax authorities are now rising up to the occasion. The agility they have shown in adapting quickly to the new requirements imposed by COVID-19 and other external shocks in order to continue to meet fiscal needs is exemplary.

However, despite the innovative and aggressive revenue drive across Africa, lack of public confidence in the governance system of most of African countries is a major reason most individuals and businesses are recalcitrant on tax payment, resulting in underpayment of taxes.

That was the focus of discussions at the recently held 7th general assembly of the African Tax Administration Forum (ATAF) hosted by the Federal Inland Revenue Service (FIRS) in Lagos. The 7th ATAF General Assembly, had in attendance tax administrators from 41 tax authorities in Africa. It is the first physical gathering of the forum since the covid-19 pandemic. The conference took place from the 31 October – 4 November 2022.

Truth is, bad leadership has been a major contributor to the lack of visible development – characterized by overwhelming corruption, infrastructure deficit and social unrest in the continent. The implication? Lack of public confidence across Africa, which speaks to the reason for the selection of the theme of the Lagos conference: “Rethinking Revenue Strategies: The Human Face of Taxation”.

It took the intervention of chairman of the FIRS Muhammad Nami to set the ball rolling for what turned out to be honest truth for all. For a start, Nami said governments across Africa must begin to rethink governance, engender public confidence and trust in government by providing value for taxpayers’ money in line with their obligations under the social contract they have with citizens. “The fiscal social contract which hinges on the willingness of the citizens to pay tax in return for the provision of public service, is a clarion call on the government at all levels in Africa to rethink governance,” Nami said. He was very correct.

The FIRS chairman won the admiration of participants at the venue when he opined that “if we must transform the tax system and enhance revenue collection in Africa, there is a need for the governance at all levels to engender public confidence and trust in government by providing value for taxpayers’ money.”

Not a few people agreed with Nami on the need to reconsider how projects are reported in the public space, with such reports communicating to convey the idea that taxpayers’ money’s is used to fund infrastructural projects.

Nami found a waiting voice in Lagos State Governor Babajide Sanwo-Olu who said that there was the need to give taxation a human face by implementing projects with taxpayers’ moneys that impact the lives of the citizens.

“There is no development without funding. We have amongst others, embarked on major transformational infrastructure projects cutting across transport, health, education, agriculture, technology amongst others,” Sanwo-Olu who was represented by the Executive Chairman of Lagos State Internal Revenue Service (LIRS) Mr. Hamzat Ayodele Subai at the event said.

He did not mince words when he drew the consciousness of the tax lords to the fact that the major infrastructural interventions of governments ought to be tailored at improving the quality of lives of the citizens and re-engineer economic growth and development trajectory with improved productivity of the citizenry, which invariably improves tax generating abilities of government.

“In a bid to save the human face of taxation, communication and feedback from the taxpayer is of paramount importance,” Mr. Subair said in alliance with the Nami.

Lead speaker at the conference, executive director of UNAIDS Winnie Byanyima, said that it is only through an equitable and sufficient taxation that Africa can free itself and set on a journey to a sustainable future where Africans will have the opportunity they deserve.

Pointing to the number of Africans under poverty line, Byanyima said African governments cannot rely on borrowing instead of reforming their tax systems as debt financing in Africa is three times the education spending, six times the health spending and twenty-two times the social spending. She stressed the need to tax the wealthy on the continent as the six richest Africans are richer 600 million of the continent’s poorest.

The views expressed by speakers at the event boldly reflected the outcome of the conference where participants were unanimous in their agreement that fiscal authorities should start giving tax payers value for their money through massive infrastructure development and human capital development, amongst others.

The challenges ahead are enormous, both at the international level and within the respective national jurisdictions. Despite that, there was a general agreement on the fact that governments need to provide public goods fairly and efficiently and these goods must be perceived as being at least of comparable quality to equivalent private services.

One major issue that re-echoed at the conference was that to be able to mend fractured social contract, delegates agreed two steps: create more room for citizen participation and; secondly to deliberately institutionalize initiatives to encourage restoration of the social contract must be taken.

For Executive Secretary of ATAF, Mr. Logan Wort, tax incentives are responsible for a lot of leakages and a major cause of illicit financial flows out of Africa. About 3.5 percent of GDP is what Africa loses in tax incentives.

“If you focus on taxation such as Value Added Tax (VAT) and others, you are regressively taxing poorer people more, but if you tax wealthy people more and better, you bring them into the tax net. According to the African Tax Outlook (2021), the total tax revenue in African countries fell by 0.2% in 2020 mainly attributed to the COVID -19 pandemic,” Wort said.

The ATAF head sighted challenges specifically faced by tax administrations during the pandemic affecting the ability to collect taxes but noted that tax administrations and different organizations responded to these challenges.

Minister of State for budget and national planning Clem Agba said digitalisation and automation of tax administration such as through e-filing, e-payment systems are critical for facilitating taxpayers to comply with a range of tax laws; noting that this simplicity, enables taxpayers to meet their obligations, and affirming that this in turn capacitates states to provide public goods and services.

As part of the sessions’ topic discussion on ‘Taxing the Digital Economy: Fairness, Inclusivity and Equity’, Grace Perez Navarro, Director, Center for Tax Policy and Administration, OECD stated the need to provide a framework that will help reduce the risk of double taxation. In her presentation, “each country should do its own impact assessment based on factors peculiar to their environment” she said.

In discussing tax and development in Africa, and the need to improve conditions for domestic resource mobilization, the assembly recognized that the social contract between the government and the public must be evident through improved public services to reinforce accountability and transparency, and in the process, build public trust.

The assembly also implored countries to prioritise the effective use of resources in a manner where the public can feel the positive impact of the sustainable development projects funded by tax revenues, underscoring that this will sustain confidence and belief in the social contract, and improve tax compliance with the multiplier effect of making revenue available for development financing.

It was also agreed that Tax morale is also higher in situations where taxpayers do not pay bribes for services and trust the tax administration. Critical towards enhanced social contract is the role of tax administration as primary interlocutors. Therefore, in relation to tax collection, it was noted that citizens’ willingness to pay tax is not only about how much services they receive from government but how they are treated by tax administration officials.

Mrs. Chiaka Ben-Obi, group lead, Digital and Innovation Support Group, FIRS in her presentation on ‘Tax and Technology- Human Centered and Socially Responsible Automation’ stressed the need to improve collection and improve technology as regards to providing people the convenience to engage with the tax authorities. “Currently the adoption by tax authorities in embracing digital transformation seeks to provide solution to teething challenges. The question is how have we taken the human side of things in technology? The implementation today is mostly driven by economies and by technology, not by human needs,” said Mrs. Ben-Obi.

Former chairman of the FIRS, Mrs. Ifueko Omogui-Okauru, pointed to the need for continuous engagement with stakeholders. She made this known during the discussion on the topic: Human Capital in Tax Administration: Taxperson of the future.

“One message is we need to engage people. Just employing people does not solve the problem. We need to remember leadership and leadership comes with the vision for our authority, for our service and even more so vision for our people. I was at a conference yesterday and I mentioned when we hear the word empowerment or enablement sometimes people feel it’s just about cash in the pocket but that’s not what enablement is” she said.

Mrs Omogui-Okauru further stated the importance of creating an enabling environment. “Enablement is about empowering people with skills that can help them, that can move them forward and be better people. It’s also about ownership and it’s a message to all of us as heads of our revenue authorities to own human capital management, to own where the authority is going”, she said.

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