Introduction

Globalization, propelled by rapid technological advancements and increased economic integration, has created numerous opportunities for productivity and improved living standards. However, not all countries, including Nigeria, have provided adequate infrastructure for citizens, especially the disadvantaged, to fully harness these opportunities, increase their incomes, and contribute their fair share of taxes. This article focuses on the critical role of social inclusion in tax revenue mobilization.

Understanding Social Inclusion

Social inclusion is about creating an enabling environment and equal opportunities for citizens to improve their well-being. According to the United Nations, it is “the process by which efforts are made to ensure equal opportunities – that everyone, regardless of their background, can achieve their full potential in life.” This involves policies and actions that promote equal access to public services and enable citizens’ participation in decision-making processes.

The Interplay between Social Inclusion and Social Contract

Achieving a socially inclusive society requires evaluating whether the social contract between the government and its citizens is effectively executed. For a mutually beneficial social contract, the government must provide the necessary infrastructure to stimulate productivity, which in turn encourages tax compliance. Conversely, if a government fails to meet its obligations, it cannot expect significant contributions from its citizens. High unemployment, poor education, inadequate healthcare, and other deficiencies hinder citizens’ ability to leverage globalization and contribute productively to the economy.

Evaluating Nigeria’s Social Contract

While the Nigerian government has made efforts to fulfil its obligations, significant gaps remain in education, healthcare, transportation, employment, and technology:

1.Education: The United Nations International Children’s Emergency Fund (UNICEF) reports that one in five out-of-school children globally is in Nigeria, with 10.5 million children aged 5 to 14 not in school. Barriers include gender, geography, poverty, and insecurity. The 2022 budget allocation for education was 5.6%, far below the recommended 15-20%. Underfunding education reduces the number of youths entering the tax-paying workforce, perpetuating a cycle of low tax revenue and further underfunding.

2.Healthcare: Nigeria’s doctor-to-patient ratio is 1:4000/5000, significantly below the World Health Organization’s recommended 1:1000. The country also falls short of the 15% health sector budget allocation agreed upon by African Heads of State. Poor healthcare infrastructure forces many to pay out-of-pocket for private care or go without, limiting their economic productivity and tax contributions.

3.Employment: Nigeria’s unemployment rate rose to 33.3% in recent years. Contributing factors include a lack of enabling environments for private sector growth, insufficient foreign direct investments, and inadequate funding for small and medium-sized enterprises.

4.Technology: Despite successes with start-ups, Nigeria lags in technology infrastructure, critical for economic development. This deficiency impacts sectors such as education, health, and agriculture.

5.Tax Revenue Generation: Nigeria’s tax-to-GDP ratio of 6-8% is one of the lowest globally. Issues include tax evasion, corruption, non-compliance, and inefficient tax administration. The World Bank suggests that a minimum 15% tax-to-GDP ratio is necessary to meet citizens’ basic needs.

Taxation and Bridging the Social Inclusion Gap

To promote social inclusion and enhance tax revenue mobilization, the government should:

1. Implement Public Reforms: Invest in child education, affordable healthcare, transportation, and SME loans. Shift expenditure from recurrent to productive or infrastructural projects to foster inclusive growth.

2. Fiscal Reforms: Eliminate barriers to effective tax administration, promote tax mobilization, and expand the tax base. Address informal sector tax challenges through presumptive tax systems.

3. Equitable Tax Administration: Minimize compliance burdens, encourage voluntary compliance, and optimize tax collections. Consider less distorted taxes like excise taxes and VAT.

4. Technology Investments: Improve technology infrastructure in education, healthcare, transportation, and agriculture to enhance productivity and innovation. Use technology to mitigate tax evasion and expand the tax net.

Lessons from Other Countries

Countries like Denmark and Sweden have high tax-to-GDP ratios due to strong social inclusion policies, such as subsidized education and comprehensive health benefits. Georgia and Tajikistan simplified their tax systems to double their tax-to-GDP ratios. Egypt and Tunisia leverage technology for financial inclusion, significantly boosting their tax revenues.

Conclusion

Government policies significantly influence social behaviour. Ensuring social inclusion is crucial for promoting income equality, stimulating appropriate social behaviour, driving tax revenues, and accelerating economic development. The government must provide the necessary infrastructure and include equal opportunities and improved living standards as core policy objectives.

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