Leveraging Digital Engagement Channels To Enhance Tax Compliance
Nigeria’s thirty-six federating states achieved a 38.5 per cent Internally Generated Revenue (IGR) growth at the national level in the first three months of 2021, compared to the same period in 2020, which shows a clear push by the states to increase their revenues.
This is according to figures released by Nairametrics, revealed that this growth was led by Lagos, Abuja and Ogun states, which recorded the highest IGR per population in the first half of 2021, as economic activity started to rebound following the impact of the COVID-19 pandemic.
The higher IGR recorded by some states is due to the presence of a larger taxable population in those states compared to other states with lower IGR. Therein lies an enormous pool of opportunities to establish a dependable database of taxable citizens, eliminate all sources of revenue leakages, and track revenue generation. All these are achievable with the adoption of a centralized citizen data platform underpinned by a multi-channel digital citizen engagement framework.
According to the cable.ng, Nigeria has 41 million taxpayers but the revenue generation is still low. This should suggest to government that, in order to maintain an upward IGR trajectory, the best way to grow revenue is by engaging with taxable citizens to drive access to easier ways of doing business, while also finding ways to expand the country’s current tax base.
One of the main generators of the State Government’s tax revenues is through the Pay-As-You-Earn (PAYE) tax, paid by workers across every state. Further revenue is also generated through taxes on utilities such as water, electricity, and others, as well as through licences and levies related to commercial activities such as the manufacturing and sale of goods. Any innovation that facilitates the ease of collecting taxes will grow the State’s IGR positively.
Presently, there is still a huge gap in the drive for collection of taxes, onboarding and engagement of new and existing taxpayers. However, with low tax compliance rates recorded in various states, this continues to be a problem that threatens to dampen the government’s efforts to increase IGR through its tax base.
One of the reasons for Nigeria’s dismal tax compliance is the unstructured base of taxpayers found across its various regions and states. This is due to many workers being employed in the semi-formal & informal sectors – such as sub-contractors, artisans, traders, semi-skilled and unskilled labourers – who are not registered on the government’s tax database and do not have a clear tax payment channel.
To address this, the government must look at how it is currently adding citizens to its tax base, which comes down to citizen engagement. This is one area in which the government has not been particularly successful; failing to convince potential taxpayers of the benefits of paying taxes or engaging current taxpayers on their journey to effectively demonstrate what they gain from paying taxes. Essentially, the government needs to effectively engage with citizens and treat them like customers.
Additionally, tax collection is also hampered by the reliance on unstructured data, meaning that the government is often not leveraging the most effective payment systems to collect revenue. In many cases, the “middleman factor” – where fees and levies are collected by the government representatives – results in possible leakage through fraud and corruption.
Using a multiple digital channel communications (omnichannel) approach to taxpayers (citizens) engagement can be effective in overcoming these challenges, as it would allow the government to identify and segment its tax base into various strata.
An omnichannel communications framework allows for a 360-degree view of the citizen (or customer), providing insight into their behaviour, needs and preferences, by unifying all messaging with a potential citizen or customer across all available communication channels. This would enable the government to roll out a segmented plan to target specific clusters of the population at a time – a more manageable approach than attempting to target the entire private sector at once.
Furthermore, an omnichannel communications framework would allow the government to not only forge a closer relationship with its citizens but also to establish richer engagements over the citizens’ preferred channels, creating the overall citizen experience.
At the same time, it would enable the government to cut out the middleman in revenue collection by introducing a direct payment system, customer notification, customer validation and a real-time accountability structure that would ultimately and positively impact tax revenue.
Taxpayers from a citizen-centric approach
Engaging with citizens is no longer about passing information to them as and when requested. To improve the citizen experience, the government should understand and leverage communication channels that people are comfortable with.
A citizen-centric approach calls for defining different stages in the citizen experience programme and tailoring the government services and payment systems to be comparable with the private sector structure. From experience in providing customer experience in the private sector, much could be gleaned by looking at the standards and pace set by the multi-channel engagement platform adoption in the sector. The private sector approach has significantly revolutionized customer engagement to create value along the customer journey at scale and we believe government can adapt this approach to create an improved community engagement with the benefits of data consolidation & improved insights into citizens’ expectations.
Importantly, the government should also establish platforms for feedback and complaints that are available on a 24/7 basis.
Instead of shying away from criticism, the government should provide a fully-fledged multichannel engagement platform for citizens to call, text, chat email & engage on social media platforms while getting live feedback. A multiple digital channel communications framework can improve the experience of citizens across the various clusters of government tax services.
The are many benefits of providing a superior citizen experience for tax payments through a multiple channel engagement approach. This includes a renewed public view of the government as anticipatory, responsive, and a model e-government centre that fosters seamless citizens engagement over their preferred communication channel for secure messaging, verification, & generation of useful insights that informs decisions to launch impactful futuristic projects.
Nigeria plays a very important role in the African region, with many trends from its private sector seeing widespread adoption among neighbouring countries.
Should Nigeria take the required steps to improve its citizens’ experience (especially for tax collection-related services) through the adoption of a multichannel omnichannel communications framework, this would likely create a replication of these services in other parts of the region. Additionally, it would also lower the barriers to doing business in Nigeria and attract foreign investment with the potential for employment and growth opportunities.