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Governance And Taxes

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GOVERNANCE AND TAXES – ARE ORGANIZATIONS BEING RESPONSIBLE?

Tax is a moral issue, the government will say tomorrow as it warns industry experts that it is determined to end avoidance and evasion. The failure of companies and corporations to pay the correct tax will, “rob our public services of valuable resources” at a time when public purse in many countries of the world is under intense pressure because of the various bailouts of with other tax payers monies.

With the increase by government at all levels to drive the revenue generated in order to meet the demands of providing for the society the necessary amenities to ensure that the whole populace are able to go about their activities it is important to note that “Values of responsibility, morality and integrity are essential in tax fairness,”.

We might not like the idea of paying taxes, but without it, democracies will struggle to function, and will be unable to provide public services. This affects both rich and poor nations, alike.

Individuals and companies all have to pay taxes. But some of the world’s wealthiest individuals and multinational companies, able to afford ingenious lawyers and accountants, have figured out ways to avoid paying enormous amounts of taxes. While we can get into serious trouble for evading payment of taxes, even facing jail in some countries, some companies seem to be able to get away with it. In addition, if governments need to, they tax the population further to try and make up for the lost revenues from businesses that have evaded the tax authority.

Why would companies do this, especially when some of them portray themselves as champions of the consumer? The reasons are many; however the summary is that companies look for ways to maximize shareholder value. Multinational companies are in particular well-placed to exploit tax havens and hide true profits thereby avoiding tax. Poor countries barely have resources to address these — many have smaller budgets than the multinationals they are trying to deal with.

Governments, tax payers, and many companies all pay the price for both local and international tax systems that simply do not work. As such Governments are less able to finance public services; individual tax payers must pay more tax; compliant companies are less competitive. Meanwhile inequality grows and social tensions too. Tackling tax avoidance and evasion has become an urgent issue.

With the continued need for infrastructure development and the competition for the use of these infrastructures between those who pay the right taxes and those who avoid and/or evade taxes by domiciling their taxes in in tax havens, it becomes obvious that the gap between the prosperous and the populace will continually grow. This is despite the fact that there is continued growth in the GDP of the country.

In recent times, we have read of how many of the biggest multinationals in the world have successfully avoided taxes by setting up business offices in countries where the effective tax rates are more or less non-existent. Some these corporates include – General Electric, Google, Microsoft and Apple. Yet these companies use the same infrastructures provided by the government of the country through taxation on individuals and other socially responsible businesses.

The same can be said of businesses in Nigeria, continuously, the effective taxes paid have continually reduced; whereas the taxes paid by individuals either directly or indirectly have continually being the main stay of revenue generation by government.

It my belief that the time has come for business conglomerates in Nigeria and Africa as a whole to recognize the fact that good reputation brings its own benefits.  Besides building reputation, increased transparency also builds critical trust, arguably the greatest insurance policy for any multinational or conglomerate company. For these businesses wishing to be more transparent about their tax, we are by this article urging them to:

  • Work with governments to disclose contracts, beneficial ownership, and the nature and amounts of tax payments;
  • Clarify intra-company transactions, including payments made for goods and services traded between affiliates and subsidiaries;
  • Help build in-country capacity to negotiate stable, mutually beneficial deals including on tax.

Tax avoidance and evasion represents such gross injustice, we continually ask that this issue should stay high on the international political agenda. On the other hand, the implementation of major change cannot happen overnight.

It is in this regard that we implore African governments and multinational companies to keep this process of ensuring non tax evasion and/or avoidance moving forward in order to continually be able to generate the resource to provide the necessary amenities that are beneficial to both corporate companies and individuals and also help spread the wealth from the high to the low.

In conclusion, it is time for people to demand from companies which benefit from an infrastructure paid for by them why they are not paying their fair share of taxes for the use of these infrastructures.

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