Thursday, January 7, 2016 3:48 pm
David Oladipupo Kuranga
Since Nigeria’s oil revenue has declined by almost 2/3 since the collapse in the price of Brent Crude, focus has shifted on increasing taxes, stopping mismanagement and leakages, and chasing down current and past corrupt officials.
While the latter two issues are of major concern, the first issue on increasing taxes, primarily on Nigeria’s elite, is the best means to ensure that corruption and mismanagement in Nigeria is brought under control.
It has been shown in numerous studies that “countries with the higher levels of corruption may have smaller volumes of government revenue and domestic tax revenue.” (Hwang, JOURNAL OF ECONOMIC DEVELOPMENT 161 Volume 27, Number 2, December 2002
The rationale behind this is that when economic and social elite are involved in financing the state, they have a vested interest in what the state does with their money. In the case of Nigeria where at times over 70% of government revenue came from oil, economic elite had very little stake in the mismanagement of government. If Nigeria’s economic and social elites were made to pay a much larger portion for the excesses and extravagances of Nigeria’s political elite, perhaps they would become a bit more vigilant in combating corruption.
Nigerian elites live in very close circles, they attend each others weddings and parties. Nigerian elites also witness first-hand when public officials are flying first-class, staying in high-end hotels, buying cars or building homes in their neighborhoods that they know political elites can ill-afford with their legitimate sources of money. It is our economic and social elites that have a first-hand front-row seat to corruption in Nigeria, not the EFCC.
Imagine a scenario where the elite in Nigeria every year were paying the bulk of the exorbitant legislative and executive allowances or were paying for the luxury car fleets, homes, and other illicit spoils of the political elite, do you think they would just sit there and smile and continue to fraternize and party with them and remain silent?
Or perhaps would they begin to start exposing what we all know has been going on and start exposing the political elite both past and present for squandering the public resources, which would largely be coming from the pockets of Nigeria’s economic and social elite. If Nigeria really wants to reign-in corruption and mismanagement, they need to enlist the nation’s economic and social elite in the fight. The only way to do that is to make sure that they have a financial stake in the outcome.
Accordingly, Taxing Nigeria’s Rich, is not only the among the best means to quickly diversify Nigeria’s revenue base and arrest the economic freefall the country is now in, it may also be the best means to win the corruption fight once and for all.
*The author is the Managing Director and Principal of Kuranga and Associates, a full-service investment, political and economic risk consultancy, and asset management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.
Kuranga and Associates Limited is an investment management advisory firm and an asset manager with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net.