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NIGERIA
Half of companies defaulting on higher education tax

The executive secretary of the Tertiary Education Trust Fund or TETFund, an agency responsible for funding key projects in public universities, has revealed that more than half of Nigeria’s companies are defaulting on paying a compulsory 2% education tax on profits.

As a result, ongoing campus projects may have to be abandoned.

Vice-chancellors and university-based unions have put forward reform proposals to ensure that neither companies nor TETFund shirk their responsibilities..

The Nigerian senate’s committee on tertiary institutions and services recently summoned TETFund, led by Executive Secretary Abdullahi Bichi Baffa, to investigate the agency’s performance and the challenges confronting it.

Baffa alleged that more than 50% of registered companies in Nigeria were evading the 2% education tax, and submitted a comprehensive list of defaulting companies compiled by the Federal Inland Revenue Service or FIRS, which is mandated under law to assess and collect the education tax on behalf of TETFund.

On receiving education tax, TETFund disburses funds to projects in federal and state tertiary institutions specifically for essential physical infrastructure for teaching and research; instructional material, equipment, research and publication; academic staff training and development; and quality assurance.

Responses

In an article in the Guardian, one of Nigeria’s influential tabloids, journalist Eno-Abasi Sunday revealed that some senior academics were not comfortable with methods deployed by TETFund and FIRS in the collection, deployment and disbursement of the tax.

Professor Ibrahim Kolo, former vice-chancellor of Ibrahim Babangida University, described the tax evasion by companies as unfortunate and a slap in the face for the agency.

“The reality is that TETFUND itself does not have in-built mechanisms to proactively follow up with firms that remit funds to it, so as to know which of them have remitted, which are yet to remit and which of them have stopped remitting, as well as reasons for the stoppage.

“One of the issues that may affect the remission of the 2% tax is that the outfit appears to be just looking at the law, which mandates firms to remit the tax. Unfortunately, in this country, people don’t obey a particular law for long before they start looking for ways of circumventing it.”

Kolo believes there is a disconnect between companies and the TETFund leadership, and that the agency has not done enough to interface with companies to break a cycle of alienation.

Further, companies did not want to continue remitting money to an organisation in which they do not have a say or a role, when they do not receive anything in return. As long as this was the case, tax evasion would continue, he argued.

Professor Biodun Ogunyemi, national president of the Academic Staff Union of Universities or ASUU, agreed with allegations by Kolo that there was possible corruption and collusion at FIRS and TETFund, and told Sunday:

“Serious efforts should be made to strengthen the drive for the collection of education tax. Efforts should not be spared in investigating whether there is collusion between FIRS and the companies that are to pay the tax. There is no reason for companies that are making profits not to pay what the laws mandate them to pay”.

The way forward

Many lecturers across the country have agreed with practical solutions put forward by professors Kolo and Ogunyemi regarding TETFund, including:

  • Appointing representatives of the public and private sectors to its governing board.
  • Regular consultations with companies, to give them a cultural sense of belonging.
  • An immediate forensic auditing of the agency’s true state of accrued funds.
  • A weeding out of possible corrupt elements within the agency.
  • Another forensic audit of FIRS to determine the level of compliance in remitting tax education money to TETFund.
  • A culture of transparency and integrity should be developed at FIRS and TETFund.

There is a general consensus among academics that the agency has so far accomplished its core mandate of assisting in rescuing decaying infrastructure on campuses and in supporting staff development and training.

However, there is also growing concern that many universities are developing an unsustainable dependency on the agency, which is unhealthy and possibly dangerous.

“TETFund is an important and relevant agency. And it has the potential to improve the infrastructural base of universities,” said Ogunyemi. “But it has limited capacity to fully transform the Nigerian university system.”
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