ylliX - Online Advertising Network

A taxing conversation – The Nation Newspaper


Of all the candidates who ran for president last year, not many would have tagged the All Progressives Congress’ (APC), Bola Tinubu, as disruptive. A leading light of the ruling party during Muhammadu Buhari’s eight-year rule, he was seen as part of the establishment. Running for office he promised to continue from where his predecessor stopped. If he won, it looked like Nigerians were going to be served more of the same.

But with his very first speech on Inauguration Day, he upended a way of life with his “subsidy is gone” declaration. In short order he would launch the naira floatation – triggering an unprecedented costing of living crisis.

Just as the nation was coming to terms with the economic changes, his administration brought before the Supreme Court a suit that gave financial autonomy to local government areas across the country. These administrative units had long suffered under the oppressive thumbs of governors who exercised control by doling out crumbs to them from the joint state-local government accounts.

This was the point at which many began to take notice the government wasn’t about business as usual. Governors who for decades ruled their states like emperors, suddenly found themselves restrained from fooling around with billions that was theirs to play with hitherto.

Many ran their councils with ad-hoc committees packed with specially chosen yes men who did nothing more than paying salaries. Elections for chairmen were unheard of in many states and where they held, mere sham events to fulfil all righteousness. So, the Supreme Court judgment was a massive jolt to their systems.

Based on that judgment they have been forced to hold elections in order for their local governments to receive allocations from the Federation Account Allocation Committee (FAAC). While many have done this grudgingly, others have gone a step further – looking for ways to circumvent the judicial stumbling block that now restricts their access to LG funds.

In Anambra, for instance, Governor Chukwuma Soludo, came up with a law that requires councils to pay a portion of what they receive from the centre into their joint accounts. Some of his colleagues are still working on ways to retrieve the power they lost.

It is against this backdrop that the administration dropped its bouquet of tax reform bills into the mix. About 14 months in the making, these legislations were some of the earliest initiatives embarked upon by the government; that gives a sense of how much Tinubu prioritised this area as part of his legacy.

The package includes four main bills: the Nigeria Tax Bill, the Nigeria Tax Administration Bill, the Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill. Each of the legislations addresses specific aspects of tax administration, compliance, and enforcement.

The bills are supposed to ensure uniformity in tax revenue administration across Nigeria, eliminate double taxation, use taxation to encourage private sector investment in critical industries and boost disposable incomes through targeted tax exemptions.

The poorest in society are key winners under the new arrangement. Individuals earning below the minimum wage are exempted from the Pay As You Earn (PAYE) tax. Similarly, small businesses with annual turnovers of N50 million or less would be exempt from paying taxes.

If passed into law, the bills would reduce corporate income tax rate from 30% to 25% over the next two years as a way of alleviating financial pressures on businesses and foster investment.

The bills propose a significant shift in VAT revenue distribution, allocating revenues based on the states where goods and services are consumed rather than pooling them centrally for redistribution. This, unfortunately, has become the main bone of contention.

The committee that worked on the reforms argues that their proposals are fair and align better with VAT’s nature as a consumption tax. The current law favours states like Lagos and Rivers which play host to the headquarters of large corporations. But it also sustains inequitable arrangements where those that contribute the most get only a fraction from the pool, while state chipping in the least get much more than they put in.

Most people who have taken the trouble to read through the legislations or even familiarise themselves with summaries, admit that while not perfect, the bills are a massive improvement on what we currently have. Of course, they challenge states which are currently content with heading to Abuja for the monthly handout from FAAC, to do more about boosting economic activity in their domains.

But, surely, no one can quarrel with tax exemptions for the poorest of the poor, or cuts for struggling families. Fair minded persons cannot be against reducing the taxation burdens on MSMES and other companies.

In other words, of the four bills, opposition has been most vociferous around that dealing with VAT. But rather than isolating it and looking at ways of addressing whatever inequities it may contain, vested interests who want to maintain the status quo would rather all four legislations are stopped in their tracks in the name of having further consultations.

Bear in mind that such discussions have been going on over the last 14 months. Among those consulted were governors who at a recent meeting of the National Economic Council (NEC) made the controversial demand to the president. It was met with a resolute pushback from Tinubu who asked them to take their concerns to National Assembly hearings.

It was the appropriate response as the parliament is the place for lawmaking and any adjustments can be made there. But what is interesting is that many of the opponents of the bills are not even ready for a discussion, or for the normal give-and-take involved in lawmaking. They just want the reforms shut down for the most specious reasons. 

What I find most exhausting is that, in typical Nigerian fashion, what should be discourse about the economic wellbeing of citizens has been reduced to a political shouting match about plots to disadvantage one region or the other.

The most hysterical voices have come from parts of the North. Ali Ndume, senator representing Borno South district, was already foaming at the gills even when he hadn’t read a line of the proposals. His governor, Babagana Zulum, would be even more zealous in his outcry, claiming the state would be unable to pay salaries and that certain federal agencies would close down due to lack of funding.

These allegations have been sufficiently exposed as baseless. Those who made them haven’t been able to provide any section of the bills to back their tales by moonlight. The deliberate injection of falsehoods and innuendoes into what should be a sober conversation just speaks to the hidden agenda of these forces.

One of such lies is that the entire ‘North’ is against the reforms. Nothing can be further from the truth. There is no ‘Northern’ consensus over the matter. Just as you have the governors voicing their concerns, many influential and respected voices in the region – some of them ex governors – have spoken out in favour of the bills.

The North is not prostrate and has its own economic strengths in trading and agriculture. Niger State Governor, Mohammed Bago, is quietly showing what can be done in this area, while his less imaginative colleagues are crying wolf. This region was known not only for agriculture but also for its textile mills: all that is now history.

Through the years these could have been revived. But in the intervening period leaders were more content with federal revenue sharing and any attempt to shift them from their comfort zones became occasion for scaremongering. It is for the leaders of the North to harness its strength and return the zone to the economic power house it once was.

Let’s not forget that Tinubu as governor once had federal allocation for the state seized by President Olusegun Obasanjo’s regime in a dispute over local government creation. His saving grace was the state’s Internally Generated Revenue (IGR). All states may not have the advantage of Lagos, but they can start somewhere. Perhaps they should ask their Enugu State counterpart, Peter Mbah, how he’s quadrupled revenues in his short time in office.

No doubt, much of the brouhaha over the tax bills is fuelled by the fear of the unknown. But we cannot expect change by doing the same things they haven’t moved us forward. We should ask governors if the current tax revenue arrangements were so great, how come they are not flush with funds for development?

Everyone talks about reshaping the fundamental structure of the economy to make it less dependent on oil. Any reforms that can help us move into that brave new future where shocks in the international crude market don’t become a source of constant national palpitation should be embraced. That’s why ethnic jingoists and alarmists must not be allowed to frustrate the tax reforms.



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *