…says taxation remains way out of country’s insolvency
The country is currently grappling with the issue of funding and insolvency, which has prompted successive governments in Nigeria to resort to borrowings as a means of meeting its financial obligations. In an interview with CHUKWU DAVID, the member representing Ondo South Constituency, Senator Jimoh Ibrahim revealed options and opportunities opened to the Federal Government through taxation. Excerpt:
You seem to be advocating that owners of luxury properties should pay more taxes. Would you like to elaborate on this position?
Yes! It is only in Nigeria that people own very expensive properties but they will not pay taxes on them. This should stop. I think this is the area where we should develop. I can see a lot of rich people buying luxury properties, Rolls Royces and all that. I believe there should be special taxes on these. Once God has helped you to afford to buy all those luxuries, the same God will help you to pay more taxes on those luxuries. I think I will stop at that.
Are you indirectly talking about personal income tax?
No, no! You don’t talk about personal income tax for the rich. We’re talking about transactional tax. So, if you are a farmer and you are successfully able to get one billion or two billion and you now want to buy a house in Dubai, you think we should not tax you. You can’t pass over that to the consumer. That’s your own personal affairs. It’s a transactional cost. I’m looking at laws that will actually police transactional tax for the rich. That’s what I’m looking at. We can do this with international judicial collaborations. And that’s the only way by which we can get this transactional tax for the rich. This is very important. So we are not saying tax your business. No. Government even provides incentive for your business to thrive but we are saying at the end of the business there is something that belongs to you which is your own income which you are now using to buy properties from the money you made from that business. For example, if you buy a car or anything you pay 7.5 percent VAT, the same thing the rich man will pay. Does that make sense?
Is it correct to say that you are calling for enforcement of property tax?
Again, I am not talking about property tax. I don’t even support any property tax because property tax will go to the tenants, whether you like it or not. I’m talking about people buying luxury. I’m talking about how many inflows that go to countries like Dubai, like the UK. These are the things I’m talking about. So, I think that we should look at that very critically. If you tax property the owner will tax the tenants. We are not talking about commercial property or rentable property. We are talking about luxury tax; let’s even start like that.
Nigerians would want you to throw more light on your idea on tax issues in the country under the current economic situation?
Let’s assume that we get the first 100 richest Nigerians into the tax net for luxury, and we give them a use code and we monitor their transactions, you will get more money; you can even get more money than half of what the entire nation will pay in taxes. For example, Nigeria VAT collectible is about five percent of the entire South Africa. So, how do you do it and about 25 percent of that of Kenya and Kenya is about 54 percent. The GDP of the tax ratio here is about 18 percent. What is GDP, the size of the economy, so what is tax so taxes want to pay to the government as obligation for activities. The GDP to tax ratio is 18 percent, meaning that 82 percent of people are not on that tax net. You think this is good for the economy that wants to be serious. If you have 82 percent of the people not under task net of your GDP, you are in financial danger. It will be difficult for you to make progress. In the United States for example, the GDP to tax ratio is hundred percent; in the UK, it is maybe 105 percent over tax than what it is supposed to be, but Nigeria is 18 percent GDP to tax ratio. Only 18 percent of the economy knows anything about tax. 82 percent never heard anything about tax. You will remember, I have a bill in the National Assembly, which is going to the second reading, which is on the Federal Data Bank. So, if you have a Federal Data Bank at the end of the day, you can just click and you see the list of 100 richest Nigerians from the data bank. You can even see the total list of journalists we have in Nigeria. Just click the data bank. Give it the name and address and details and you know what to do with them. You need a data bank to get this done, but not that you will do property tax, no. I think that is not it.
What is the implication of only 18 percent of the economic size being in the tax net as you claimed?
Yes! You and I, indeed Nigerians should be worried that 82 percent of the people in Nigeria are not in the tax net. They have never seen tax or heard about it in their lifetime. We are not saying go and tax the poor, but what we are saying is that you should simply look at the rich first because in a trying time like this, the rich have a lot of roles to play. You may say things are bad but it is not everybody that things are bad for. I’m sure you know that it’s when things are bad that you have the greatest opportunity to make money. If you look at strategy in Harvard definition, it is to make good things happen in chaotic situations. Making opportunities in chaotic situations is the Harvard definition of strategy. Every chaotic situation provides a fantastic and robust strategy for you to move and make more money. And this money you make should pay tax.
Are you saying that people should pay more tax in difficult times?
Yes! That’s exactly what I am saying, because people make more money in difficult times. This huge money made during the difficult times should be also taxed proportionally.
President Bola Tinubu submitted four tax reform bills to the National Assembly, which have raised a lot of contention within the polity. What is your take on these bills?
I am not here to talk about the tax reform bills. I am just suggesting areas where we can enhance our revenue generation in the coming year, because you know our GDP to debt ratio is 49.9 per cent. So, the economy is depending largely on loans to fund the budget. The challenge now is that additional borrowing reduces your growth. So, you can’t grow with additional borrowing, and without borrowing you cannot develop at all. So, you are in a quagmire and you need to come out of it. And to come out of it means generating more revenue. You know, people talk about Bola Tinubu here and there, complaining that things are tough and I laugh many times because this is completely nonsensical. You all know that the Buhari government handed over one percent, Cash to GDP ratio. That is what is contained in the handover note of Buhari to Tinubu government. He handed over one percent of cash to GDP. So, as we talk now, GDP to cash is 1.5 per cent. Now, tell me, if you take over a company today and they tell you that the cash available is 1.5 per cent and you have 500 workers to pay their salaries that same night that you take over, and you have to buy different materials for certain services to be effectively rendered, and you must not sack people, how will you move?
Let’s assume that you buy First Bank, and the cash ratio to the size of First Bank is one percent. So, if First Bank is worth three trillion and the cash available is 300 billion, and three customers are sending instructions to transfer 500 billion, how do you handle that? If you are President and you are not Tinubu, how do you handle one percent cash ratio to GDP without printing money? If you print more money, you increase the money in circulation which will lead to inflation, it leads to foreign exchange routing and all other economic crises, which make the economy burdensome to people. I am talking from knowledge; I am not talking from sentiment.
You seem to be advocating that owners of luxury properties should pay more taxes. Would you like to elaborate on this position?
Yes, it is only in Nigeria that people own very expensive properties but they will not pay taxes on them. This should stop. I think this is the area where we should develop; all of us. I can see a lot of rich people buying luxury properties, Rolls Royces and all that. I believe there should be special taxes on this.
Are you indirectly talking about personal income tax?
No, no, you don’t talk about personal income tax for the rich. We’re talking about transactional tax. So, if you are a farmer and you are successfully able to get one billion or two billion and you now want to buy a house in Dubai you think we should not tax you. You can’t pass over that to the consumer. That’s your own personal affairs. It’s a transactional cost. I’m looking at laws that will actually police transactional tax for the rich. So we are not saying tax your business. No.
What is the implication of only 18 percent of the economic size being in the tax net as you claimed?
Yes, you and indeed Nigerians should be worried that 82 percent of the people in Nigeria are not in the tax net. They have never seen tax or heard about it in their lifetime. We are not saying go and tax the poor, but what we are saying is that you should simply look at the rich first because in a trying time like this, the rich have a lot of roles to play. You may say things are bad but it is not everybody that things are bad for. I’m sure you know that it’s when things are bad that you have the greatest opportunity to make money. If you look at strategy in Harvard definition, it is to make good things happen in chaotic situations. Making opportunities in chaotic situations is the Harvard definition of strategy. Every chaotic situation provides a fantastic and robust strategy for you to move and make more money. And this money you make should pay tax.
