FOR THE RECORDS: Open Letter to President Muhammadu Buhari – Okey. A. Ogboo B.Sc. (Hons.), MBA, CIM, FCA.

 

Dear President Muhammadu Buhari,

Avoid Blanket Increase of the Value Added Tax (VAT) Rate for the Purpose of Meeting the Minimum Wage Payment

Preamble:
I will give a preamble, your Excellency, because this will be the first in the series of my open letters to you.

Sir, from time to time, in this your second term, I intend doing open letters to you on economic, financial and socio-political issues in our country, Nigeria. What is inspirational about this exercise I am embarking upon is that my letters will be well intended, and provide suggestions and recommendations on the issues addressed; thus, helping to deliver good governance to all Nigerian citizens, or at least, to a greater number. You will agree with me that Nigerians are long overdue for good governance and the much needed, even elusive “dividends of democracy.”

There is priceless honour in serving one’s country to the best of one’s ability! And where one thinks that the reasonable pay is not enough, the alternative is not to steal and embezzle tax payers’ money – one resigns and goes out there to pursue unlimited income initiatives, but legitimately too.

My letters will be a complete departure from the type you have received (and may continue to receive) from certain quarters that were intended to sensationalize issues and/or denigrate your person. Furthermore, my letters will be simply structured, so you will not spend much time reading long and winding pieces.

Sir, the reason I am well and constructively intended in this self-imposed, but germane task is that way back in 2008 I quietly chose six Nigerians as my heroes. You are among the six Nigerians! The other heroes of mine are Prof. Chinua Achebe, Chief Gani Fawehinmi, Chief Chukwuemeka Odumegwu Ojukwu (Ikemba) – these three are late now, but their spirits and enviable personalities sparkle and live on. The others are Prof. (Sen.) Jonathan S. Zwingina, and Mr. Fola Adeola. There are some virtues and values that run commonly through these exceptional individuals – dead or alive. And they do not need any further introduction in this piece – there is no Nigerian in the age threshold of fifteen years below my age and above that does not know them. I am in my fifties now.

Sir, you must be convinced by now that I will not embark on anything that will disparage your person or not add value to your effort in providing good and productive leadership to Nigerians. I have reasonable expectations, therefore, that you must find time to read my letters when I write.

I am currently residing in Calgary, Canada. I aspirationally migrated to Canada in 2012 as a full-fledged adult who attained modest heights in both my accounting profession and in my career in banking and finance, and the downstream oil and gas sector, in Nigerian. Here in Canada, I am still fully engaged in the financial services practice – with concentration in investments and retirement plan consulting. Even though I do not currently sleep and wake up in Nigeria everyday, I am fully in touch, and quite current with issues in our country as they evolve and unfold. I visit often, and do continue to express my patriotic zeal, from time to time, by chipping in one or two things I have learnt from my international exposure, towards the development of my home country, Nigeria.

Now to the topic of today’s letter.
Sir, there is palpable fear, and the curiosity is quite disturbing, that the federal government may increase the VAT rate for the purpose of financing the new minimum wage. I am not aware though that the federal government has openly stated that VAT rate will be increased, but the quarters and calibre of individuals that have discussed it, coupled with non-denial by the government, leaves no one in doubt that the increase may happen in no time.

Tax on consumption, which VAT represents, has been argued to encourage savings and investments, and this makes the economy more efficient. However, as obtains in Nigeria currently, a blanket rate on VAT does not make for a progressive tax system. An individual who earns =N=30,000, for example, will definitely feel the impact more than an individual who earns =N=300,000, when both of them buy the same good on which a 5% VAT rate is imposed.

Certain adjustments and interventions are required to design a progressive consumption tax. It is doubtful if our extant taxation system is efficient enough to allow for such interventions that will produce the desired progressive consumption tax. I will revisit efficient tax system later.

Sir, if the current VAT rate must be tinkered with, I will advise that you avoid a blanket increase thereof, so that the already impoverished masses do not get burdened the more, given the hardship in the land now. I will recommend reducing the current VAT rate on vatable basic consumptions, while increasing the rate on luxuries and high-net-worth consumptions. The decrease and increase in rate will be designed in such a way that government can still achieve its objective without overburdening the masses.

The above submission, however, assumes that tinkering with the VAT rate is the only option available to the government to be able to meet the new minimum wage payment. But we know this is not true! I am quite certain, sir, that government’s ability to pay the new minimum wage (or fulfil some other obligations to the citizenry) does not just lie in increasing the VAT rate. The truth is that there are many areas that governments in Nigeria can concentrate attention on, and they will generate even more to achieve the objective, and meet certain financial obligations, without tampering with the VAT rate. If anything, the VAT rate should be made zero on basic consumptions, and the time to muster the political will to address contemporary issues squarely is now! One of the areas to interrogate urgently is the cost of running government in Nigeria.

Sir, can we critically look at the cost of running government in Nigeria, especially the emoluments of elected politicians? In decent climes, especially those Nigeria bragged to overtake in year 2020 (which is just a couple of months away), salaries of public servants are placed in the public domain, and I assure you, they receive no more than is made public. People do not go into public service, especially on elective capacities, for the purpose of becoming multi millionaires and billionaires, but to provide service, and be remunerated reasonably well in the process. There is priceless honour in serving one’s country to the best of one’s ability! And where one thinks that the reasonable pay is not enough, the alternative is not to steal and embezzle tax payers’ money – one resigns and goes out there to pursue unlimited income initiatives, but legitimately too. The law and the rule of law are always there to effectively check anybody’s excesses.

Sadly, sir, the reverse is the case in Nigeria. In terms of volume and, maybe, quality, it seems Nigeria has good laws, but there is dismal lack of respect for rule of law. And that is where the difference lies.

What our legislators, for example, take home as emoluments are not only heinous and scandalous, but everything is shrouded in secrecy, leaving the masses totally deprived. Can we in all honesty say that what these guys take home from our common treasury is as stipulated by the law of the land? Ditto for those in the other arms of government, but I focus more on the National Assembly in this letter, because our elected legislators are supposed to be the grass root representatives of the people. When we factor in the amount that is usually stolen, misappropriated, squandered and embezzled, it becomes clear why Nigerians suffer in the midst of plenty; it becomes clear why a country like Nigeria is still arguing about the ability to pay a minimum wage of =N=30,000 monthly.

The above amount is less than the daily take home of someone on eight-hour per day at minimum wage of $15 per hour in Canada. It has not been proven that Nigeria is less endowed than Canada or any other country in terms of resources. We have it all – natural, human, economic, name it. In her book, “Reforming the Unreformable”, Dr. Ngozi Okonjo-Iweala observed that “on the economic side, Nigeria was and still is a well-endowed country.”

It is high time we also began to tell ourselves the truth as to whether this presidential system of government is suitable for us. It is either it is too expensive or it can easily be abused given our unbridled penchant for the abuse of all policies and programs of government, however well intentioned.

To me, sir, the difference lies in effective rule of law, efficient management, and strict deployment of public resources for public good. In most of those countries we are struggling to copy, if one steals or misappropriates tax payers’ money, he or she is visited with the consequences for bad behaviour, no matter his or her position and ranking in the society! The level of impunity in the embezzlement and misappropriation of public funds in Nigeria is simply outrageous, and hurtful to the economy and the citizenry, and the perpetrators are never punished. On the contrary they are often celebrated and rewarded all over again with our resources. This must stop if we genuinely want to see our resources deployed to develop our country and create an environment where all citizens, or at least, a greater number must benefit and thrive.

It is high time we also began to tell ourselves the truth as to whether this presidential system of government is suitable for us. It is either it is too expensive or it can easily be abused given our unbridled penchant for the abuse of all policies and programs of government, however well intentioned. And if we must run the presidential system of government, can’t we make certain adjustments to suite our peculiar circumstances? Can’t a unicameral legislature, for example, save us a lot of money? Must we have the two chambers of the National Assembly? Can’t our legislators begin to function part-time and be placed on sitting allowances, instead of full-time? Can’t we reduce the retinue of assistants that elected persons surround themselves with at the expense of the tax payers? What of the number of cars in their convoys? Can’t there be a tone at the top that will begin to promote the culture of scorning obscene display of ill-gotten wealth by public servants?

Sir, questions like the ones above, posed with genuine intention in every facet of our polity, will certainly begin to offer unique perspective on why governments have always failed to develop our country and offer the so-called dividends of democracy to her citizens.

Perhaps no other factor can account for the poverty and underdevelopment pervading the Nigerian space more than the cost of running government, and the institutionalized corruption in high places. The high cost of running government seems to me a function of a faulty super structure that we have. I will take on the concept of super structure in my subsequent letters.

God has favoured our country with His partiality (if I can put it that way) in creation – we don’t have to spend much fighting natural disasters. I know some of the religious mercantilists out there (who in their ungodliness have become part of the corruption syndicate in Nigeria) will start casting and binding, because I said God was partial. I repeat: when it comes to topography and resource endowment, it seems to me God was biased in favour of Nigeria. Those who have lived in the so-called advanced countries or other places outside Nigeria can tell the stories better than me. These guys wake up everyday fighting nature to survive, and billions of dollars is spent in the process year in, year out. Yet, development, advancement, innovations, functional and efficient infrastructures, health care delivery system, education, transportation, research and development, and overall citizens’ welfare, are usually not compromised. Reason? Money appropriated for any project must go into that project one hundred percent. No cock-and-bull stories from any quarters or individuals – it is not tolerated under any guise.

Sir, what you are doing to ensure that Nigeria does not continue to wear this odious badge of a corrupt nation is unprecedented. However, the fight must not only be intensified, it must be carried on in a manner that even a doubting Thomas will find it difficult to doubt the genuineness of your intention. Let this be the new direction of the fight against corruption in your second term.

Sir, if you would see this your second term as epochal as most well-meaning Nigerians view it, I would plead with you to demonstrate to Nigerians that they can still find a leader in a Nigerian.

I said earlier, sir, that I will revisit efficient taxation system. However, it is a topic that requires elaboration, and delving into it here may contradict my earlier promise to make my letters to you brief. Permit me to give it the detailed discussion it deserves in another letter.

Suffice it to say that establishing an efficient taxation system in our country is a critical agenda, and its place in running a robust financial system cannot be overemphasized. With an efficient taxation system, you will soon discover, sir, that the over dependence on oil revenue, with all the corruption it breeds, may not be necessary. In fact, a little patriotic management of our resources may devote oil money to capital expenditure while revenue from tax (it can be huge) can be comfortably deployed to recurrent expenditure – and Nigeria will be better for it.

As a teaser, sir, just take a cursory look at the figures and the simple calculation below:
1. The average annual revenue from oil between 1999 and 2016 was about =N=2.4 trillion.
2. The National Population Commission said recently that Nigeria’s population is about 198 million, and that 55% thereof (i.e. 108.9 million) is of working age.
3. Let us assume conservatively that half of the working age population (i.e. 54.5 million) is fully employed, and the annual personal income tax averages =N=55,000 per employed person. This gives about =N=3.00 trillion, from personal income tax alone. We have not factored in corporation tax from companies! This will even be an incentive for governments to work to ensure that the economy functions to get more people employed, thus expanding the tax net. It is a win-win situation for everybody – the government and the governed!

Sir, the above simple analysis (even with the conservative variables) suggest that if governments at all levels do what they should, and ought to do, in terms of efficient management of resources, there will be enough or very close to enough, to make all citizens, or at least, a greater number happy. If citizens are happy and can trust their leaders, the best in them will manifest positively. And the bickering about the part of the country the leader comes from may become less contentious. The positive multiplier effect of efficient management and deployment of resources is gargantuan in all dimensions – job creation, high productivity and efficiency in production, robust public utilities and infrastructures, crime reduction, happy and patriotic citizenry, name it.

Sir, if you begin to think critically about the aforementioned issues, and results begin to show, you would become a leader, an unforgettable statesman, in the minds of your citizens. One thing is incontrovertible – and it is empirical – Nigerians are good followers if they see the leader they can trust. There will usually be pockets of powerful vested interests that will always want to undermine genuine intention of government. You can ignore them and/or set the law after them.

Recall, sir, the followership you and your deputy, late Brig. Tunde Idiagbon cultivated among Nigerians with your War Against Indiscipline (WAI) back in 1983. Nigerians are still looking for a good leader they can trust. Sir, if you would see this your second term as epochal as most well-meaning Nigerians view it, I would plead with you to demonstrate to Nigerians that they can still find a leader in a Nigerian.

Sincerely,

Okey A. Ogboo,  B.Sc. (Hons.), MBA, CIM, FCA.
Calgary, Canada

All rights reserved. This material and any other digital content on this platform may not be reproduced, published, broadcast, written or distributed in full or in part, without written permission from Pegasus Reporters