In this age of social media, it is common place to see celebrities show off how far they’ve come and how successful they are. The degree of opulence on Instagram may not all be real, some are “make-believe”, but no doubt, some earn decent income. Even if you’re too old fashioned to be on Instagram, you probably have a facebook account, read blogs or use either of WhatsApp, BBM and similar app. The fact that you’re getting to read this is a proof, as it will only be on my twitter timeline or other social media account or blog. With any of those new media platforms, you’re sure to see and read stories that makes you ponder on the inequality of fortunes. You’ll read how some people earn in one night, what some won’t make in one year. That’s life for you!
Please hear me, don’t begrudge those who make good money from showbiz. They deserve their reward. If you think it’s easy to sing, make movies or crack jokes, go and try it out. Let’s see if you won’t die of starvation. You can get Don Jazzy to sign you up or ask Ali Baba to feature you on his January 1st Concert or plead with Omotola Jalade Ekeinde for a movie role. Many don’t realise that before the big bang, those celebrities went through years of penury and hard work. When they hit their big breakthrough, that’s when they start showing. And they need show to stay in business. That’s why it’s called show business – business of showing.
Show Business, call it showbiz, is one of the most lucrative businesses in the world. Showbiz is big deal and those who are destined to prosper by it are living larger than life. Some live a make-believe life but quite many of them are managing big wealth. What you may not be able to say is how much the government has been able to harness the potential tax revenue in that space. What we hear often is how much the entertainment sector feel neglected with little or no government support. They argue that the sector was built by own efforts, but that’s equally true of many other sectors of the economy. If other sectors and individuals are still required to comply with tax laws, entertainment sector can’t be different.
In fact, the entertainment sector holds the axe for driving income tax revenue in States where they are highly concentrated. Let’s put the issue in some context, using the recent experience from Nigeria rebased GDP. Nollywood is one of the 13 new activities that were included in arriving at the rebased GDP. Nollywood, captured as “motion pictures, sound recording and music production” made a surprise showing in the GDP. Others are entertainment, research, patents and copyrights, etc. This brought the number of economic activities reported in the GDP computation to 46 as against 33 in prior series.
Prior to the rebasing, the entire “entertainment sector” was classified amongst “other services’ with negligible contribution. The rebased GDP of $510 included contribution of about $5 about 1% of GDP from this sector. Assume a benchmark of Tax-To-GDP ratio in emerging economies of 20%, you’ll expect the sector to generate $1b tax revenue. That’s about N200b at current exchange rates. Let’s even assume that based on current level of development, we can only achieve Tax-To-GDP ratio of 10%. That will still give $500m (N100b) tax revenue from the sector. Compare that to whatever the actual is!
I know many of our celebrities, musician, entertainers, actors and actresses are consummate business people. Some of them are fairly organised – they have established corporate structures around their businesses to instil good business practices. Some operates under “ventures” and unincorporated entities and some just trade under their individual brand name.My guess is that a few of them would probably be making fair attempts at complying with tax obligations and tax payments. If we do the checks, there’s still be a large portion of untapped tax revenue, just like it is in many other sectors. But the entertainment sector is one where Tax Authorities can make a good start at pushing compliance and expect good success. Irrespective of the legal structure, tax is payable at varying degrees – whether by the corporate entity or as individuals.
The question is how well are our Tax Authorities doing with income taxes of individuals, including our celebrities? We can’t continue to be fixated on this over-used excuse of an industry that grew out of nothing, with no government support! If that line of argument is stretched, people could also argue that the road to their offices are not tarred and should therefore be excused from income tax. How many people enjoyed bursary while in school or social benefit while languishing in the unemployment market? How many businesses enjoy government subvention or direct investment that justify corporate tax payment? No one likes to pay taxes and not many people have justifications to pay tax. Taxes are paid because it is an obligation. Simple!
Until 2011, some political office holders enjoy exemption from taxes in respect of their official emoluments. For example, the official emoluments of the President, Vice President, Governors and their Deputies used to be exempted from tax. With Personal Income Tax (Amendment) Act of 2011, all of these office holders are now taxpayers. So, everyone should contribute to the common purse – celebrity or commoner. The tax law cover every individual…deemed to be resident in Nigeria in any given year. All income from sources inside or outside Nigeria from trade, business profession, vocation, employment etc. are taxable.
When you read about posh cars, luxurious mansions, lavish lifestyle, outrageous cravings, what comes to mind is how much tax is paid. Around the world, stories abound of many celebrities who have been charged for tax evasion. The rich and famous – sportsmen, artists, musicians, celebrities and others who are trying to escape the reach of the taxman. Their offence usually range from non-disclosure of income, failure to file tax returns, underpayment of taxes etc. Some even get charged for claiming wrong deductions. Like a funny joke of claiming millions of followers as dependants for tax relief!
The kind of pressure being faced by many Tax Authorities to perform miracles of revenue generation will soon change the game. I can foresee the turn of events in few years to come. Nobody want to be on the wrong side of the law. Everyone understand that citizenship begets benefit and obligation. Tax obligation of citizens is clearly laid out in Chapter II of the Nigeria Constitution. Read if in Section 24 (f). “It shall be the duty of every citizen to declare his income honestly to appropriate and lawful agencies and pay his tax promptly”.
Here’s a simple advice – tax evasion case challenges the idea that any publicity is good publicity. An indictment by Tax Authority is a quick way for a celebrity’s face to get splashed across media platforms. But this is a kind of publicity that may take away all the endorsements and back-to-back performances. Celebrities are constantly in the spotlight. The larger-than-life posture is as interesting to fans and followers as it is to the tax man. You may read up my previous tweetax session on presumptive taxation here https://yomiolugbenro.com/?p=76. If the tax law is applied literally, tax may be charged based on your assumed net worth.
In 2014, Rev Sam Adeyemi Lagos State award for Individual Tax compliance, presented by His Excellency, former Governor Babatunde Fashola. It will be great to see an entertainer, comedian, music or movie star, or other celebrity pick up 2015 award. A prestigious tax compliance award can also be added to your collections of AMAA, BET, MOBO, MTV and others awards. It’s a big brand boost to be a responsible citizen. It’s not just by being honored with MON or GCON. You can make a name as the most socially responsible celebrity with best record of voluntary tax compliance. That could just land you an endorsement deal from @FIRSNigeria. Imagine that!
In defense of the celebrities, mechanism for paying taxes, level of awareness and enforcement need to improve. We need more than being compelled by the law; the ease of paying taxes must improve as evaders find it hard to escape. We have laws that mandate Tax Clearance Certificate for most business transactions but people earning millions of Naira procure N10k TCC! The tax law empowers Tax Authority to request information from Banks concerning Taxpayers. With the introduction of BVN, it shouldn’t be difficult to link all Bank accounts to individual account holders. Non-disclosure and under-disclosure of income should be getting easier to track.
Some State Tax Authorities already have VIP and HNI (High Networth Individual) tax desks focusing on the rich and famous. Few years back, a friend received a congratulatory letter from LIRS for his acquisition of brand new car and then got asked to come regularize his taxpayer ID as his tax record cannot be traced.
It won’t be easy to get a complete list, but there are low hanging fruits that can easily be harvested. Just start somewhere and continue. Using our celebrities for example, you could approach their respective Association for help. Comedians have their umbrella body under which they contact and interact with each other. Seek help of ALIBABA. Movie producers and theatre practitioners have an Association. If you don’t know them seek help from any of the industry bigwig. Omotola was named by Times Magazine as one of 100 most influential people in the world in 2013. Ride on her influence. Even if you don’t like music, you probably know, at least, one music producer or artist.
Tax Authorities could kick off tax revenue drive by this sector-based approach. Celebrity tax drive will be a good focus area. A VIP TAX DESK for the entertainment sector will be nice. Yeah! These guys are VIPs – you got to accord them due respect. They fly private jets, have breakfast and dinners in different continents. Some are brand ambassadors of big brands. They are responsible people – just let them know their obligations. They’ll comply.
Let’s end it here for today and pick up next week. Please retweet, favourite and share the news. Thank you for following the discussion and for your time. Please send in your feedback.
Note: This article was posted in verses on my Twitter handle, @YomiOlugbenro, on Wednesday, 28 October 2015. Every Wednesday at 17:00 WAT (CUT+1), I run a “tweetax” session with hashtag #TaxWiseNG where topical tax issues are discussed. The tweets are subsequently posted as an article on my tax blog www.yomiolugbenro.com, facebook.com/YomiOlugbenro and LinkedIn.com/YomiOlugbenro.
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