BY MARTIN IKE-MUONSO
Over the centuries, human belief systems govern them through unwritten rules, beliefs and attitudes accepted within a social group. Because of the depth of their acceptance, they invariably become standards and foundations for accrediting or rejecting other behaviors. Virtually all societies are distinguished by these standards, whether perceived or real. Because of their role as a fundamental principle for other behavioral inclinations, social norms feature prominently in taxpayer compliance decisions. One of the main reasons for this is peer influence or collective pressure. For example, a family that is deeply religiously inclined and has chosen, as part of the value system, to maintain high levels of moral rectitude may not have one of its members as a tax evader or thief. .
Unfortunately, a confusing extension of this example would be that Nigeria, a country with 98% of the population professing Christianity or Islam, has one of the highest percentages of non-compliant tax avoidance behavior. Ideally, religious people profess loyalty and obedience to constituted authorities and the law. Compliance with tax obligations is essential to acknowledging this loyalty through deeds. But Nigerians are not known solely for their religious zeal. Their clannishness and ethnic consciousness are also well pronounced, as are other widely shared behaviors such as corruption, disregard for the rule of law, rent-seeking culture, systematic clientelism, etc.
Human interactions lead to latent pressure, mainly forming a mixed collective of beliefs, values and rules. Although nobody likes to pay taxes yet, most people would agree that it is essential to obey the constituted authorities who must provide public goods and services to facilitate the life of the citizens. Obedience to constituted authorities; loyalty to the government is a requirement of respecting the principles of law. The Nigerian Economic Summit Group’s Tax and Grant Collection Survey in 2019 found that only 17% of Nigerians are likely to consider not paying taxes to be wrong and punishable. Twenty-two percent think it is not wrong to evade tax obligations. This perception seems strongest in the Southwest, where up to 30.4% do not consider it wrong to evade taxes. The findings support a 2015 PwC report titled “Guess How Many Nigerians Pay Taxes and How Our Government Spends the Money.” The report compiled by Taiwo Oyedele showed that only around 13% of the national workforce was in the tax net. Comparatively, only about nine percent of companies operating in Nigeria file returns. The report also pointed out that even the government is not fully compliant in deducting unpaid taxes from their workers’ wages. While it is evident that many factors combine to explain these abysmal compliance rates, it is perhaps not out of place to seek the connection between our defining social norms as a country and this observed compliance performance. .
Hard work, productivity and resilience are the dominant virtues of the average Nigerian. This is why Nigerians remain in power, even in the face of the grueling frustrations of its leadership. But these irritations mainly concern ordinary citizens who are neither tied to political power nor in a government office. Many connected people are working hard to drain public resources into their private pockets. Their general dispositions and actions lead to frustrations that hamper the efforts of the ordinary Nigerian. Because the most important motivation of public officials is corrupt personal enrichment, they practically impede the functioning of the rule of law. Therefore, it is more than the usual expectation to think that voluntary compliance will be at noticeably higher levels in our predominantly lawless society. Yet there is significant collusion between ordinary citizens who may not be directly involved and those who champion this sordidness. While the latter takes care of the theft, the former, who suffers the consequences, maintains a disturbing silence and becomes an accomplice in the process. A famous saying says that those who remain silent in the face of evil are its partners.
It is even more disturbing when we see ourselves through the prism of religion, which is also a dominant characteristic of our population. The expectation of genuinely religious people is to condemn evil. Unfortunately, our religiosity seems to be a platform for the automatic approval of people of questionable integrity willing to support such organizations. Members of government and political authority use state resources to legitimize their excessive actions. They bless their communities, places of worship, and relationships with the breeze of illicitly acquired Commonwealth wealth to buy their legitimization. It is common practice for communities and relations to condemn one who has been in certain political offices and returned without demonstrating deep pockets of collectively held resources. These are the roots of other vices that define our social norms, such as rent seeking, weak public administration, the culture of impunity and electoral corruption. These defects are necessary to maintain flight standards, which weakens the ability to comply with tax laws. Governors, elected politicians and their cronies rarely pay taxes. Those who comply are therefore those who do not have this political link and this coverage. And because the structures for implementing our laws are fragile and convoluted, resorting to the law to enforce compliance does not have the force desired.
The summary is that we are a social group of lawless, corrupt, ethnic and religious fanatics. These attributes seem to define our contemporary social norms. But corruption is one of the biggest killers of tax compliance. First, it kills trust in tax administrations. Taxpayers cannot trust those who consciously steal and waste the proportion of their income they have worked in unworthy circumstances to earn. Far worse is the level of public financial mismanagement and embezzlement, which is so upsetting that it is driving some people to decide to stop making contributions in the name of taxes. Those who embezzle these public funds believe they can manipulate the law and its structures and get away with it undetected. Yes, of course, they end up succeeding. Taxpayers also learn from it. They try as hard as they can to pay negligible amounts compared to what they should declare and bribe tax officials and banks over the nil results of our toothless bulldog laws. More than 80% of tax officials across the country accept bribes. It is also a dominant social norm within the Nigerian Revenue Service. The loss of confidence in tax administrations and the associated government is also explained by the fact that they systematically fail to meet citizens’ expectations for public goods, the rule of law and security. The ability of government to effectively deliver these three desirable elements correlates with citizens’ assessment of the level of good governance they enjoy. Unfortunately, most Nigerian governments do not score up to 15% of their performance on these criteria. Secondly, these extremely low levels of performance on these good governance factors ultimately translate into difficult economic conditions, which worsen transaction costs and the general situation of the entrepreneur. What is more, trying again to improve their residual income after the private provision of these desirable goods, they resort to non-compliance.
Many analysts claim that Nigeria inherited these undesirable social norms from the discovery of crude oil. Prior to its discovery, officials had to do a lot of work to strategize on increasing public finances and apply it to gain public trust and improve tax compliance. The oil boom suddenly removed the need for this level of effort to raise funds. It is legendary that Yakubu Gowon said Nigeria’s problem was how to spend its money. This orientation has undoubtedly sold the seeds of sharing public resources rather than generating resources. It is a fact that those who are concerned with the production and generation of resources act differently from those who are more interested in mere consumption. So while other countries were outbidding productivity, we were fighting over resource sharing and theft. Every person wants to have a piece of the national pie. Political positions present opportunities that many quickly take advantage of by depriving citizens of the public goods, rule of law and security that these resources should normally provide. Of course, the consequence is that most people reproduce the same exercise at their level. Non-compliance is how tax evaders appropriate public money. The collective rationalization of these excessive norms is also one of the forces that sustains them. There seems to be some consensus that those who have access to public resources should touch them. Accordingly, in keeping with our ingrained cronyism and ethnic and religious fanaticism, political favors extend to those who meet these conditions even when they are ineligible. The tax authorities also extend these supposed favors to their relatives, religious brothers and those who can bid. As this corrupt enrichment circulates, large segments of Nigerian society, unfortunately, condone and rationalize it as it kills the government’s ability to raise its revenue collection.
In the final analysis, reshaping our prevailing social norms of corruption, lawlessness and cronyism will undoubtedly improve tax compliance rates. Obviously, the surest weapon against them is the revitalization of the judicial system. An effective justice system that rests on an equally strict rule of law tempers the tides of these undesirable social norms while strengthening the tendency of citizens to abide by the Constitution. The tax administration must understand that working on social standards is at the heart of its overall tax education. For example, in communities where people rarely engage in productive ventures implying that they would have very little to contribute as taxes, part of tax education for improving IGR would be to encourage them reverse that norm and become more productive.
Martin Ike Muonso, an economics professor with an interest in sub-national government RGI growth strategies, is Managing Director/CEO of ValueFronteira Limited. He can be contacted by email at [email protected]
I’m on business. is committed to posting a diversity of views, opinions and commentary. He therefore welcomes your reaction to this article and to any of our articles by e-mail: [email protected]