The Reliance on Lifestyle Audits for Public Officials to Curb Corruption and Tax Evasion in Nigeria

Widespread corruption in the Nigerian public service is having a far-reaching detrimental effect on the economy. Public officers and other policy makers that formulate socio-economic policies are the main perpetrators of corruption in Nigeria. This article focusses on the viability of lifestyle audits for public officials as a strategy for combating such corruption, the proceeds of which are usually laundered and warehoused either offshore or in Nigeria with the assistance of professionals such as bankers and lawyers. If such warehoused wealth is discovered it is usually forfeited to the treasury of the government of Nigeria, after the trial of the offenders. This article interrogates the adequacy of the relevant legislation and the efficacy of the statutory bodies responsible for lifestyle audits in Nigeria, such as the Code of Conduct Bureau, which is discussed, as are the Code of Conduct Bureau and Tribunal Act, 2010, the Economic and Financial Crimes Commission Act, 2004, and the income tax reporting framework administered by the Federal Inland Revenue Service. It appears that the provisions relating to lifestyle audits under the Nigerian statutes are not robust enough to curb corruption and tax evasion. In addition, the enforcement of such lifestyle audits is hindered by the immunity granted to certain Nigerian public officers and jurisdictional conflicts in prosecuting corruption cases.


Introduction
No society is immune from corruption. However, the high levels of corruption in the Nigerian public service have created numerous socio-economic and political challenges in the society and economy. Corruption has given rise to poor economic growth, poverty and insecurity. 1 Issues of corruption have dominated Nigerian politics and public discourse since the country's return to democratic government in 1999. Successive civilian governments since 1999 have formulated and implemented policies and legislation aimed at curbing corruption. However, notwithstanding such efforts, corruption is commonplace. 2 Nigeria ranked 130 th out of 180 countries, with 26 per cent on the corruption index perspective in 2019. 3 Corruption is undoubtedly the most pressing governance and development challenge that Nigeria is confronted with today because it fraudulently transfers public goods and services into private pockets. Corruption in the public sector remains a problem in Nigeria's quest to inculcate transparency and accountability in its public officials. 4 The failure to deliver social services, the endemic problem of power supply and the collapse of infrastructure are all linked to corruption 5 in all tiers of the Nigerian government. 6 The United Nations Convention against Corruption defines the term "public official" as any person holding a legislative, executive, administrative or judicial office or office in a public agency or public enterprise. 13 It may also refer to any other person defined as a "public official" in a domestic law of a state. 14 The Corrupt Practices Act defines a "public officer" as a person employed or engaged in any capacity in the public service of the federation, state or local government, or in any public corporations. 15 This definition is adopted for the purposes of this article. The article focusses on the public sector because it plays a pivotal role in the formulation and implementation of policies that affect both the public and the private sectors. 16 In essence, the public sector drives the practice of corruption in Nigeria, since it is responsible for the formulation and implementation of the overall socioeconomic and political policies. Moreover, the public sector is directly involved in the prevention and detection of crime as well as the prosecution and conviction of criminals in Nigeria. In this regard, the Economic and Financial Crime Commission Act, 2004 17 stipulates that economic crime includes corruption and tax evasion and non-violent criminal and illicit activity committed with the aim of acquiring wealth from illicit sources. Economic crimes also include any form of fraud, narcotic drug trafficking, money laundering, embezzlement, bribery, looting and any form of corrupt practices, tax evasion and other such transactions. 18 The difficulty in defining the term "corruption" could have led to the emergence of many variants of corruption in Nigeria.
Evans argues that the interrelationship between tax and corruption has both positive and negative outcomes. 19 For instance, a well-developed tax system can provide a good regulatory framework and institutional foundations which can help to combat corrupt practices. Furthermore, a well-developed tax system can increase the availability of ownership information and discourage the use of shell companies and other opaque legal arrangements which conceal the identity of the true owners of such companies to curb corruption and tax evasion. 20 Similarly, the elimination of strict bank secrecy for tax purposes is likely to reduce corruption and tax evasion in Nigeria. 21 A good tax system could further discourage money laundering and corruption. Corruption reduces tax compliance. For instance, a society that is corrupt may enable tax evasion because some tax officials may seek bribes from taxpayers and that could reduce tax 15 Section 2 of the Corrupt Practices Act; see also Taxation refers to the pecuniary burden imposed on properties, income or commodities, activities or transactions of natural and juristic individuals by the government in order to generate revenue in Nigeria, and tax evasion is the illegal and intentional non-payment or underpayment of tax. 26 Although tax evasion is our main concern in this article, it must be distinguished from tax avoidance. The former is the illegal underpayment or non-payment of tax by concealing or misrepresenting the nature of a transaction, while the latter admits the transaction but the transactions are arranged in such a way that the tax payable is lower. 27 Notwithstanding the difference in the definition and treatment of tax avoidance and evasion, the outcome is essentially the same: that is, the loss of revenue to the government treasury. 28  corrupt practices. Where the subjects of the audit are found to be living well beyond their known means, investigators will suspect that the affected officials have illicit sources of income. 31 Lifestyle audits are also used by auditors to ascertain if the income claimed by the public officials on their tax returns corresponds to their lifestyles. 32 In Nigeria lifestyle audits are not provided for in a specific statute. As a result, various provisions in different statutes such as the Code of Conduct Bureau and Tribunal Act 33 and the Federal Inland Revenue Services (Establishment) Act 34 are instead utilised. A lifestyle audit is one of the strategies which has been employed to stem corruption but it has failed to effectively curb the increasing levels of corruption in Nigeria, especially in the public sector. A major reason for this is the failure of the relevant authorities to adopt and integrate technology, as well as the lack of political will on the part of top government officials to tackle corruption in all its ramifications. For instance, the former Auditor-General of Nigeria (Mr Azie) submitted a report on the profligacy of the executive to the National Assembly (Nigeria Federal Parliament) on 10 January 2003. This incriminatory report was believed to have led to the Auditor-General's abrupt retirement on controversial grounds. 35 The removal of the Auditor-General from office before the expiration of his term may be an indicator of the fact that the executive arm of the Nigerian government was not comfortable with the audit which revealed its wrongdoings.
The corruption in the Nigerian public sector is a major problem and an issue of great concern to ordinary Nigerians and the international community. 36 For instance, a forensic audit conducted by the audit firm of PriceWaterhouseCoopers (PwC) in 2015 revealed that a sum of 1.48 billion United States of America dollars (US$) was unaccounted for in the Nigerian National Petroleum Corporation's (NNPC) account because it had not been remitted to the Nigerian federation account. 37  regulates the country's petroleum industry. 38 Given this background, the article explores the viability of lifestyle audits as a strategy for combating and preventing corruption and consequently tax evasion in Nigeria.

Corruption and tax evasion in Nigeria
Corruption in the Nigerian public sector is currently very difficult to detect and for the enforcement authorities to curb. It is also submitted that the law enforcement agents themselves are reputed to be the main perpetrators of corruption. 39 Corruption is the greatest obstacle preventing Nigeria from achieving its enormous potential with regard to the provision of public goods and services, because it drains billions of dollars annually from the country's economy. 40 Corruption impedes development and weakens the social contract between the Nigerian federal government and its people. 41 It is pervasive in Nigeria. Michael Page categorises it on the basis of diverse criteria such as the scale of occurrence, the sector in which it is prevalent, and the tactics and behaviours used in perpetrating it. 42 "Grand corruption" or "political corruption" refers to the corrupt practices committed by high government officials, which distort policies and the proper functioning of the state to benefit a few public officials at the expense of the public good. 43 "Petty corruption" is everyday abuse perpetrated by low-and mid-level public officials in their interactions with ordinary citizens who are trying to access public goods and services. 44  The payment of tax is an obligation which natural and juristic persons owe to the state in conformity with section 24(4) of the Constitution. Nevertheless, corruption impacts negatively on the tax administration when tax officials accept or solicit bribes in exchange for lower tax assessments. 52 Consequently, corruption in the tax administration is a serious concern in many jurisdictions, including Nigeria, where corruption usually involves practices such as paying bribes in exchange for understating liability and avoiding registration or extorting taxpayers through threats of overassessment. 53  environment, reduces the compliance levels and increases the quantum of tax evasion. 54 Therefore, the Nigerian federal government should promote transparency and accountability through the employment of technology and the digitalising of transactions to curb corruption and tax evasion. For instance, Okunogbe and Pouliquen argue that the adoption of electronic tax filing (e-filing) in developing countries decreases tax evasion and corruption. 55 Schlenther also argues that corruption and tax evasion are interrelated because corrupt networks allow and facilitate the illegal flow of funds, money laundering schemes and tax evasion. 56 The authors concur with this assertion and argue further that corruption is exacerbated by the lack of and/or poor use of technology to detect and curb it in Nigeria.
Alm, Martinez-Vazquez and McClellan argue that corruption enables tax evasion by making it easier for taxpayers to hide their income. 57 Thus, widespread corruption affects tax compliance and increases tax evasion. 58 Corruption also negatively affects tax revenue collection. 59

The role of lifestyle audits in combating corruption and tax evasion in Nigeria
The main ground for instituting lifestyle audits in the context of this article is to ascertain whether public officials' living standards are consistent with their lawfully obtained income. Lifestyle audits could serve as justifiable measurements of the extent of corruption in the Nigerian public service. For instance, the conviction of the former governor of Bayelsa State (Mr DSP Alamieyeseigha) on the charges of false assets declarations and money laundering were the main grounds for the forfeiture, recovery and repatriation of the assets he corruptly acquired in a case instituted against him in the United Kingdom by the Nigerian government. 60  There are many methods such as the net worth method and the administration of a lifestyle questionnaire employed by auditors to detect public officials who are receiving more than their legitimate incomes. The net worth method is commonly used in lifestyle audits and it refers to the difference between assets and liabilities at particular points in time, usually conducted at the inception and the end of the tenure of a public servant. 62 For career public servants in Nigeria, it is conducted every four years. 63 If there are differences between the public official's net worth and the legitimately known income of that official, the additional assets are deemed to have been acquired from unlawful or unknown sources, a fact which may point to corruption unless otherwise explained. 64 This method gives evidence of income that may be hidden. 65 The second method of conducting lifestyle audits is through surveillance. Surveillance involves unannounced physical visits and/or the use of sophisticated technological equipment to gather information about the person being investigated and audited. In Jim-Jaja v COP 66 it was held that the powers of the police must be exercised lawfully so that if there is a reasonable ground to embark on the surveillance of citizens, the permission of the courts must be sought first. Surveillance is the method most preferred by law enforcement agencies such as the Nigeria Police Force in gathering valuable financial information to curb corruption. 67 The third method of conducting lifestyle audits is the administration of a lifestyle questionnaire on public officials. The questionnaire asks various questions about an individual's lifestyle, the total assets, the liability owed, how the assets were acquired and the source of the funds used to acquire the assets. 68 The issuance of questionnaires may be triggered by various incidents including the submission of incorrect tax returns to the revenue authority or due to the reporting of any suspected corruption transactions or the possession of 62

Legal and institutional responses to corruption in Nigeria through lifestyle audits
Part 1 of the Fifth Schedule to the Constitution mandates public servants to maintain a high standard of morality, transparency and accountability in the conduct of government business. To this effect, section 6(1) of the Fifth Schedule to the Constitution restricts public officers from asking or accepting any property or benefit of any kind, either for themselves or any other person, while discharging their duties. However, the Constitution allows a public officer to accept personal gifts or benefits from friends and relatives in the context of cultural practice. 71 This provision is unnecessary and likely to encourage corruption. Section 15(5) of the Constitution provides that the Nigerian state should abolish corrupt practices and the abuse of power by the state and its functionaries. Section 15(5) of the Constitution does not provide for the different types of corrupt practices that the Nigerian state may prohibit. However, this may be inferred from subsidiary legislation such as the Economic and Financial Crime Commission Act. 72 Sections 140(1) and 185(1) of the Constitution provide that a person elected to the office of president or as a governor of a state in Nigeria shall not begin to perform the functions of that office until he or she has declared his or her assets and liabilities to the CCB. 73 This provision allows records of the properties of political office holders to be compared to ascertain whether they acquired their assets legitimately. The CCB also 69 Jayawickrama makes it mandatory for public officers to declare their assets immediately after taking office and at the end of their periods of tenure. 74 Similarly, the Constitution provides that no person shall offer any property, gift or gratification as an inducement for the granting of any favour to a public officer in his or her official capacity. 75 This section seems to be in conflict with section 6(3) of the Constitution. Federal and state public service officials are required to conform to and observe the provisions of the Code of Conduct Bureau and Tribunal Act and shun corruption and the abuse of office. 76 The Constitution also provides that a public officer should abstain from putting himself in a position where his or her personal interests conflict with his or her official duties in order to forestall corrupt practices. 77 Part I, section 2(b) to the Fifth Schedule to the Constitution prohibits a public officer from engaging or participating in the management or running of any private business, profession, or trade, except where he or she is employed on a part-time basis or doing farming. 78 Similarly, the President, State Governors and their Deputies are prohibited by the Constitution from being employed in the service of foreign companies and enterprises after leaving office. 79 The law also prohibits the President, the Vice President, State Governors, Deputy Governors and other public officers from accepting any benefit of whatever nature from any companies, contractors, businessmen or their nominees or agents. 80 Although the Constitution does not give any reason for the provisions stated above, it is submitted that collecting gifts or benefits from contractors could be unethical and corrupt. Despite all the provisions stated above meant to prevent public officials from engaging in corrupt practices, section 308 of the Constitution protects some public officials such as the President of Nigeria, his deputy and others from any civil proceedings or criminal prosecution relating to acts or the practice of corruption or any other offence. Tribunal Act. 81 The Code of Conduct Tribunal is a quasi-judicial body established by the Code of Conduct Bureau and Tribunal Act, it has exclusive and original jurisdiction to try public officers on charges of corruption and related cases. 82 The CCB was established as a federal executive body under section 153(1)(a) of the Constitution. It has the power to receive declarations by public officers made under paragraph 12 of Part I of the Fifth Schedule to the Constitution and examine the declarations in accordance with the requirements of any applicable law and retain custody of such declarations. It also has the power to make the declared assets form available for inspection by any citizen of Nigeria on such terms and conditions as the National Assembly may prescribe. 83 However, the National Assembly is yet to enact a law enabling the public to access the declared asset forms of public officers in the custody of the CCB.
The CCB also has the power to investigate any lodged complaints and where appropriate to refer such matters to the Code of Conduct Tribunal. 84 Thus, a false declaration of assets by a public officer in Nigeria is an offence.
The Constitution provides that where the Code of Conduct Tribunal finds a public officer guilty of contravening any relevant provisions, he or she will incur penalties stipulated in the Fifth Schedule to the Constitution. 85 The Code of Conduct Bureau and Tribunal Act may impose penalties such as the vacation of office in any legislative house, disqualification from membership of a legislative house, disqualification from holding any public office for a period not exceeding ten years, and the seizure and forfeiture to the state of any property acquired through corruption. 86 However, section 18(3) of the Code of Conduct Bureau and Tribunal Act stipulates that these sanctions are without prejudice to the penalties that may be imposed by any law where the conduct is also a criminal offence. Public officers often register their illicit assets in the names of their spouses and children in an attempt to conceal such assets from the prying eyes of the law. 87 Thus, public officers are required to declare also the income, assets and liabilities of their spouses and unmarried children. 88  corruption, but the selective application of the enforcement mechanisms falls short of the principles and access to information guidelines provided in articles 3 and 9 of the African Union Convention on Preventing and Combating Corruption, 2003.

Challenges affecting the reliance on lifestyle audits to combat corruption and tax evasion in Nigeria
The administration of lifestyle audits is affected by numerous challenges which have essentially made it a less effective method of combating corruption and tax evasion in Nigeria. The immunity clause in section 308 of the Constitution grants immunity from criminal and civil prosecution or proceedings to the president, governors and their deputies of any criminal or civil offence committed whilst in office. 97 This immunity provision was meant to allow the incumbent office holders to focus on governance and prevent them from being distracted by litigation. 98 However, the immunity provision is counterproductive because these public officers use it as a shield to amass wealth through corrupt practices in Nigeria. 99  Progressive Congress. Some public officers make anticipatory assets declarations, while others under-declare their assets. 111 Public officers that make anticipatory assets declaration are usually hitherto private citizens who inflate their asset profile so that when they leave office their assets will seem be within the bounds of legitimate income. However, career public servants usually under-declare their assets and keep some assets in the name of others to avoid being charged with tax evasion and/or corruption. But advanced technology such as electronic money transfer has also made money laundering easier, so Nigerian lifestyle auditors must be technologically savvy to be able to perform their function effectively. However, it is relatively easier to trace illegal transactions done electronically than those facilitated by the transfer of physical cash. The Auditor-General of the Nigerian Federation has also identified the inadequate use of appropriate and modern technology as one of the challenges facing audit institutions. The Auditor-General advocated the automation of the Conduct Bureau, the Code of Conduct Tribunal and the Auditor-General's office. 118 The authors submit that asset declaration and verification procedure is still done manually in Nigeria. Okifo and Igbunu 2015 Journal of Education and Practice 59-60. 116 Wald 2018 https://www.weforum.org/agenda/2018/04/governments-join-digitalpayment-revolution-fight-corruption/ 1-2. 117 Adetunji Comparative Analysis of the Control of Financial Crime 67. 118 Ayine 2019 https://www.oaugf.ng/news1/258-audit-as-an-instrument-for-fightingcorruption.
Electronic copy available at: https://ssrn.com/abstract=3897804 the assets of the millions of public servants is impossible without the employment of sophisticated technology. In addition, the CCB and the Auditor-General staff have so far failed to provide adequate training and skills in modern forensic auditing techniques. Thus, the CCB and the Auditor-General staff are ill-equipped to detect and gather sufficient evidence regarding corruption and to effectively carry out their oversight duties and risk-based audits. 119 In addition, the effectiveness of the assets declaration regime in Nigeria is hampered by the fact that the human resources available to the CCB and the Code of Conduct Tribunal are grossly inadequately equipped and resourced. 120 Moreover, the CCB and the Code of Conduct Tribunal are not completely independent institutions since they are controlled by the executive arm of government and are thus susceptible to its whims. 121 It seems as if the selection of the cases prosecuted by the CCB and the Code of Conduct Tribunal is motivated by political interest rather than by a genuine interest in combating corruption, because corruption-related cases are discontinued once the accused become more politically compliant to the ruling political party. 122 The lifestyle audit regime in Nigeria is also bedevilled by another weakness, in that it makes no provision for the participation of the public and civil society organisations. The Constitution provides that the CCB should make assets declared by public officers available subject to such terms and conditions as the National Assembly may prescribe. 123 Many Nigerians and civil society organisations have made requests to the CCB to make available the assets declarations by public officers, especially political office holders, for inspection, without success. 124 The CCB has refused all such requests. The CCB's refusal is based on the fact that the National Assembly has not passed a law enabling the public to access such assets declarations. Agenda v the Code of Conduct Bureau, 125 Media Rights Agenda (MRA) requested access to the assets declaration forms of certain public officers, but the CCB refused to grant their request. Subsequently the MRA instituted an action in the federal High Court but the case was dismissed on the ground that there was no law in place yet that mandates the CCB to allow the public to access the asset declaration of public servants. The CCB's refusal to allow the full participation of the media and civil society is a violation of Article 12 of the African Union Convention on Preventing and Combating Corruption, 2003.

The effect of the corona virus (COVID-19) pandemic on corruption and tax evasion in Nigeria
The COVID-19 virus that is ravaging the whole world is having a negative effect on the Nigerian economy, which depends on oil exports for financing a substantial part of its budget. 126 The federal government of Nigeria decided to adopt some policies in the bid to boost internally generated revenue in the midst of dwindling foreign earnings from crude oil. However, such policies have created further financial burden for the ordinary people. 127 The federal government increased certain taxes, such as stamp duty, despite the obvious fall in the income of most households and the pervasive job loss in Nigeria due to the COVID-19 pandemic. 128  duty on house rents and certificate of occupancy transactions. 129 The price of petroleum products and electricity tariffs were increased by the federal government agencies, which claimed that the government was withdrawing from subsidising these products. These policies have created resentment against the federal Nigerian government and the ENDSARS (End Special Anti-Robbery Squad) protests, which were online and street protests against police brutality and corruption generally, were a product of the enduring hardship which was accentuated by the COVID-19 epidemic and the government's hard-hearted response. 130

Recommendations
The policies and legal framework for lifestyle audits in Nigeria need to be reformed. Consequently, section 308 of the Constitution should be amended to discourage public officials from engaging in corruption with impunity. This would serve as a deterrent to public officers from engaging in corrupt practices due to their fear of public prosecution. Similarly, part 1, section 6(3) of the Constitution, which allows a public officer to accept personal gifts or benefits from friends and relatives within the context of cultural practice, should be expunged from the Constitution because it encourages the giving and acceptance of bribes. For instance, a retired Nigerian public officer claimed that a sum of 9.8 million dollars recovered from his house was the accumulation of gifts received from friends and relatives. 139 The bodies charged with lifestyle audits such as the CCB, Code of Conduct Tribunal and the Auditor-General's office should be well resourced and provided with digitalised facilities and modern technology in order to cope with the asset declaration forms of millions of public servants, which cannot be processed under the current era of manual system. In addition, there is a need to equip the staff of the CCB, the Code of Conduct Tribunal, the Nigeria Police Force and the Auditor-General's office with intensive training and technological skills. Enabling laws such as the Code of Conduct Bureau and Tribunal Act should be amended in order to grant the public access to the asset declaration forms of public officials in order to assess the accuracy and completeness of such forms. The salary of the staff of the agencies responsible for lifestyle audits must be increased and adjusted to inflation, especially under the COVID-19 pandemic-induced recession, so that the staff members do not themselves engage in corrupt activities. In addition, the increase in the tax rate, electricity tariff and petroleum products by the federal government of Nigeria should be reversed since most people are struggling to get jobs and decent incomes under the COVID-19 pandemic.

Conclusion
Conducting lifestyle audits of public officials is acknowledged as a measure that could aid in promoting accountability, transparency and integrity in the conduct of government officials and public officials in Nigeria. 140