Taxation vs. Corruption; Nigeria’s Heavyweight Battle

My friend Ofili’s blog is provocatively titled: Corruption is Not Nigeria’s Biggest Problem. The argument of the blogger is that, at US$20billion, Nigeria’s tiny budget (at least relative to the US’ $US600 billion defence budget) is a bigger problem than corruption, especially as our budget is 85% oil and gas sourced, compared with US revenues which is 90% taxation revenue. He concludes that Nigeria’s prime problem is actually inadequate taxation income.

Yet, tax-evasion is primarily a function of corruption. To fix corruption before taxation is to fix the leaking bucket before heading for the stream.

The AU’s Thabo Mbeki High Level Panel on Illicit Financial Flows from Africa reports that most of the illicit flows from Africa occurs in Nigeria and is occasioned by private sector corruption, tax evasion, and illegal transfer of profits abroad by multinationals. These transfers are usually effected by the routine bribery and subversion of public officers. (Bola Tinubu & the Bribecode)

Without taming Corruption, all new taxation and IGR vehicles will be funnels for corruptocrats. I have argued elsewhere, using figures from Global Financial Integrity, that our Customs alone can easily double our oil revenues… but for Corruption.

Oil and Gas is actually, primarily a taxation revenue accruing under the Petroleum Taxation laws and the holes in the revenue are primarily due to… Corruption. Kuwait’s Q8, runs over 4,000 petrol stations in Europe, our NNPC cannot even supply local petrol, due to… corruption. If we earn a trillion dollars and invest it in a new Shipping line, like the Nigerian National Shipping Line, it will be killed by corruption. If we build a brand new airline, like Nigeria Airways, it will be killed by corruption. Ethiopian Airlines can rake in huge revenues via personnel, corporate and aviation taxes for the country, but we can only aspire to replicate same by tackling corruption first. Any short cuts – such as the ill-fated joint venture with Virgin Atlantic which produced billions in tax and other revenues for Nigeria – will be destroyed by… corruption. I can do worse that quote Branson here:

“We fought daily battle against government agents who wanted to daily make fortune from us, politicians who saw the government 49% as a meal to seek for all kinds of favour…watchdogs (regulatory body) that didn’t know what to do and persistently asking for bribes at any point…Nigeria people are generally nice but the politicians are very insane…that may be irony because the people make up the politicians…

“But those politicians are selfish…we did make N3billion for the federal government of Nigeria during the joint venture…realising that the government didn’t bring nothing to the table/partnership except dubious debts by the previous carrier, Nigeria Airways…The joint venture should have been the biggest African carrier by now if the partnership was allowed to grow, but the politicians KILLED it…Nigeria is a country we SHALL NEVER consider to doing business again..”

Taxation revenue is tied not just to honest collection, but to the SIZE of an economy. If reputable investors swear NEVER to do business in Nigeria, and the country is awash with companies only too happy to do business with corrupt leaders, that should tell us where our main challenge lies.

The blogger cites Lagos State as an act to follow; but Lagos impresses only because we are particularly impressionable. Nigeria’s greatest tragedy will occur if we ‘sort’ out all our main problems without sorting out corruption. That will create a ‘Lagos Stupefying Effect’ where things ‘sort of’ work – especially for the rich and upwardly mobile – leaving a vast underclass of the underprivileged and voiceless to fend for themselves. That will be Africa’s security nightmare and her greatest undoing: leaking national revenue baskets just big enough for the ultra rich and the top middle class, that throw sops to permanently dispossessed hordes in urban and rural slums.

However, by prioritizing anti-corruption with the Bribecode, we remove the greatest legacy of corruption: a leadership owned by godfathers and accountable to them. When jobs from the most humble civil service slots to the presidency are purchased by money, bad governance – including taxation governance – flowers. But leaders thrown up by merit rather than corruption will consistently produce better decisions, actions and outcomes.

Prioritisation is an important debate, but to argue that corruption is not Nigeria’s main headache is to syndicate a lie fabricated by corruption’s main beneficiaries.