In the second half of the twentieth century, the emergence of scores of new states has made international politics and economics truly global for the first time in history. At the same time, technology has made it possible for nearly every country to participate in events in every part of the world as they occur. Unfortunately, the explosion has not been accompanied by similar increase in knowledge. The continents interact but they do not learn from each other.
The uniformity in technology, access to information, is accompanied by an implicit assumption that nations, both developed and developing world learn from each other, to fast-track growth and boost the economy.
Countries differ in their economic success because of their different institutions, the rules influencing how the economy writes, and the incentives that motivates people.
Inclusive economic institutions, such as those in South Korea or in the United States, allow and encourage participation by the great mass of people in economic activities that make best use of their talents and skills and that enable individuals make the choices they wish. To be inclusive, economic institution must feature secure pirate property an unbiased system of law, and a provision of public services that provides a level playing field in which people can exchange and contract; it also permits the entry of new business and allow people to choose their careers.
No country no matter how ingenious can thrive on a mono-economy and avoid economic volatility. There must exist a paradigm shift from a mono-economy to diversification of the economy. This will culminate into economic growth thereby creating employment, infrastructural development, increase in standard of living, improved GDP and composite IGRs, and solve myriads of problems on the economic front. Taxation as a socio-economic tool could be used to achieve these aims via tax holidays, tax incentives, law tax tariffs, widening the tax base to include informal sectors thereby making these nations attractive to investors.
Keywords: Economic Growth, Taxation, FDIs, IGRs, 3rd world nations, Tax holiday, Tax Haven.
Taxation has become a muse for government of developed and developing nations. As a socio- economic tool, it can be used to drive the economy forward. The shift from a developing nation to a developed nation might require rigorous government policies to transform the economy.
Among the lessons to learn from developed nations is, „how they make their economy work‟ and sustain it. This Lee Kuan Yew, who arguably is the founding father of Singapore, utilized in moving Singapore from a 3rd word nation to a first word nation.
Nations of the world must interact and take cue on administration, investment from each other. Though circumstances may differ, but will surely put us on the right pedestal. If I have learnt to see clearer, it is by standing on the shoulder of giants.
The burgeoning problems facing third world nations necessitate a restructuring in the way the economy is being administered.
THE HIATUS AND FAILED STATUS QUO: MOVING IN CIRCLE
The aphorism that one cannot repeatedly to a thing in a particular way and expect a different result remains tenable, even today.
In developing nations, more attention is paid to taxation of formal sectors, thereby neglecting the informal sectors. While this has helped sustained the economy in the revenue generation, and meeting the needs of the society. It does not acutely represent the proper economic status of these nations. The informal sector, which makes profits though depleted by the vicissitude of life, is a booming sector that should be taxed and developed.
One major factor that has bedevilled the potential of these nations is their „consumption culture‟. They are nations who only import and never export. There is over dependence on one major source of revenue. This has long stifled the growth of these nations.
There is also the quick-fix elixir to seek for FDIs, loans and aids from developed nations to finance the already failed institution still operative in these countries.
These archaic solutions will only bolster us to keep moving in circles.
PARADIGM SHIFT IN APPROACH: MOVING FROM 3RD TO 1ST
The desirability of developing nations becoming first world nation does not augur well with the quick-fix panacea been adopted by the government of these nations for decades. The stratagem has been utilised well to sustain them at their complacent state. The solution lies above this medium.
It is noteworthy to point out that, taxation and investment are like Siamese twins. The relationship between tax and investment transcends this present treaty, but the focus here is to see how tax can bolster the economy of a state above the status quo been earlier adopted.
As espoused by Professor A. D. Lawton, tax could be used to foster production and investment as a contemporaneous pursuit of subsidiary aims by the government.
Investor are always seeking for means to increase their wealth-base, whilst, government are also seeking for ways to increase their revenue to accomplish more for their individual states. They are always seeking for means of getting more and paying less tax. Tax could be seen to be Janus-faced- tax being used to attract investors, and, also used to boost the economy.
One of the problems facing these nations is that they run a mono-economy. For example, Nigeria only depends on oil and the shake in the international market has affected its economy thereby culminating into recession. To increase the revenue base of these nations might be herculean but it is achievable. Of course, their budget being passed yearly cannot transform their economy. The suggested solution would be that governments of these nations would meet with investors to invest in their ailing sectors- health, education, industry, agriculture, infrastructure, entertainment, power, technology, roads, rail transport, tourism, sports. This will not only boost the economy, but will also increase the standard of living, create jobs, increase IGRs, and boost the GDP. However, to attract the investors, tax holiday must also been given to them, and repatriation of funds back to their home country. These nations will then become tax havens for individuals willing to migrate, and tax holidays given to investors willing to incorporate their companies there.
On investment by foreign investors, partnership with firms and corporations in other climes making them have subsidiaries in these nations could boost the economy. Here, these firms/corporations would then have subsidiaries to create a venue for development, employment, etc. Subsequent upon this, they will enjoy tax holidays in turn. This investment would then help revive sectors which have been left to age, and non-operative.
Another area of focus is the taxation of informal sectors.The broader spectrum of business being run in these nations is under the informal sector. This probably explains why attention has not been given to them. Taxing these sectors will help revivify the IGRs of components states. This is achievable by ensuring that these businesses are registered by the government, thereby increase the tax-net to cover them.
It is evident that the yearly budget in developing nations cannot help boost, revive, and maintain their redundant sectors. Investments in tourism, agriculture, infrastructure, sports, technology, education, could help transmogrify these nations to a 1st world nation and solve myriads of problems on the economic front.
In its drive to attract investments and position the state economy on sound footing, one of the states in Nigeria- Lagos established an Office of Overseas Affairs and investment (LAGOS GLOBAL). The office is tasked with the responsibility of creating an enabling environment for global competitiveness and promoting inward and outward foreign direct investments in the state.
Also, to make the Lagos economy a self-sustaining one, the tax net was widened to include more groups and individuals. This was done by the overhauling of the informal sector.
In achieving these aims and goals, there must be a synergy between the governments of these countries, to ensure its smooth passage. For this to be achieved, the legislature, executive, accountants, and technocrats must collaborate together.
In peroration, synergy and partnership between developed and developing nations, foreign and local firms, foreign and local investors should be encouraged as a sure path to progress, and economy boom.
Diversification of the economy as opposed to a mono-economy being run by 3rd world nations is the sure path to progress. And, technology which has virtually transformed most first world nations must be invested in. Education will surely help maintain, and transform any society, and its neglect will definitely spell doom for any nation.
No nation of this world can ever survive on its own; no man can.
Olajide Ademola Omosebi
Legal Officer/ In-house Counsel
Mactay Group/ Global Manpower Ltd
Ed's Note - This article was first published here.
Photo Credit - www.blog.lawinfo.com