The Perils of Taxation Without Credibility – By Tochukwu EzukanmaArticles, Columnists, Lagos, NNP Columnists, State News, Tochukwu Ezukanma Wednesday, July 25th, 2012
By Tochukwu Ezukanma | Lagos, Nigeria | July 26, 2012 - A major problem of Nigeria is the oil money. Oil money is extraordinary in that it does not come from any national effort, toil or sweat. It comes not from any agricultural, manufacturing, scientific or technological endeavor. It results not from our resourcefulness, innovation or ingenuity. It is a windfall; it, literally, drops from above.
The monthly financial allocations from the federal government to state and the local governments are similarly windfalls. They hover like clouds in the sky, and then, drop like rain every month, emptying into the outstretched and expectant hands of state governors and local government chairmen. The problem with such hand-outs is that it is hard to handle them with thrift and accountability. As the hackneyed but instructive saying goes, “easy come, easy go”
Nobody labored for the money. Consequently, nobody feels particularly responsible for it because it is, particularly, nobody’s money. So, the governors and the politicians can be remiss and extravagant in their expenditure of their allocations. And because the people do not have a strong sense of ownership of these hand-outs, their demand for accountability and transparency in their spending is half-hearted. A very powerful antidote to the office holders’ lack of accountability and the people’s almost indifference to the handling of public funds is internally generated funds, of which taxation is a major source.
As a simple example: if the inhabitants of a town collectively determine their budget for the administration of their small town for the year, and decide to tax themselves equally or based on a formula that determines the tax for every individual. It will be very difficult for whomever that is entrusted with the disbursement and expenditure of this fund to be careless with it. The contributors of this money will feel that the money belongs to them and can confidently demand a detailed account of its spending. Also, they will feel empowered and justified to punish whoever that has appropriated or misused the money.
Therefore, the attempt by the Babatunde Fashola government to get the residents of Lagos State to pay their taxes is splendid. But is the government surprised that many residents of Lagos State are reluctant to pay their taxes? They are unwilling to pay their taxes because of their profound distrust of the Lagos State government. The inhabitants of the state, like most Nigerians, cannot trust their governors, legislators, local government chairmen, etc. This is because all tiers of governments in Nigeria have, for so long, lied to the people and stolen from them.
We can all rant, rave and pen diatribes against the federal government for its corruption, extravagance and theft of public funds. But corruption, extravagance and theft of public funds are not the preserve of the federal government. State and local governments are all equally culpable of the same offenses. Despite the socialist and populist posturing of the Lagos state ruling elites, they are just as corrupt, arrogant, scornful of the masses and prone to stealing from the public coffers like the governing officials in other states and at the federal government.
The corruption, misappropriation of public funds and lack of accountability of the Fashola administration is repulsively evident, even, to the most casual observer. In addition to their stealing of public funds, the governing officials in Lagos State, in collusion with their business associates and political cronies, siphon off staggering amounts of money from the state treasury to service the elite relationships and agreements that brought the governor to power and continues to secure his stay in power. So, like the federal government and other governments in Nigeria, the Lagos state government lacks credibility.
Consequently, the people do not trust the Fashola government; they do not believe that their tax money will be put to the most constructive use. His administration can prove its credibility if it curbs its corrupt practices, end the stealing of the people’s money and become accountable and transparent in its expenditure of public funds. Then, it will earn the confidence of the people. And the residents of Lagos State will pay their taxes, not under threat of punishment or promises of reward, but wholeheartedly.
The 18th Century German sociologist, Max Weber, defined power as “the ability to get others acting in accordance to your will”. And the eminent American diplomat, John Galbraith, distinguished between three types of power: condign, compensatory and conditioned. He wrote that every exercise of power, to a varying degree, must involve one or more of these forms of power. Unlike condign power (predicated on punishment or fear of punishment) and compensatory power (based on the promise or denial of reward), conditioned power is the most effective form of power. The exercise of this type of power is based on people being conditioned – understanding and/or agreeing – to the need to obey. Therefore, they obey the rule not because of fear of punishment or promise of reward but because they are convinced of the necessity to do so. Therefore, they obey the law, even, when there is no one positioned to watch over them or to enforce the law.
Instructively, this most effective form of power (getting others to act in accordance to your will) is based on trust. If the government of Lagos State can earn the trust of the people, the people will obey its laws, including, the tax laws without coercion or cajolement, that is, willingly. On the other hand, without this trust, the government must resort to tough-handed measures like hectoring and punishing Lagosians to pay their taxes. Still, it will fail in its tax drive.
Tochukwu Ezukanma writes from Lagos, Nigeria.
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