It is a season of taxes in Nigeria, as the Federal Government, desperately looking for funds to finance its programmes and overheads, is indirectly becoming a tax master. By the government’s body language, Nigerians are going to pay more taxes, directly and indirectly, even when their fortunes are not increasing, while their misfortunes are heading north – increasing.
Last month, the Federal Government gave Nigerians notice of its plan to increase the Value Added Tax (VAT) from the current 5 per cent to 7.5 per cent. According to the Minister of Finance, Budget and Planning, Zanaib Ahmed, the government’s projection is to put the new VAT regime into effect from next year, by which time consultations with states and local governments would have been concluded, while the National Assembly amends the VAT Act.
As Nigerians await the National Assembly’s decision on the proposed VAT hike, the Federal Government has also given notice about its intention to reintroduce tollgates on federal roads across the country. Revealing this, Minister of Works and Housing, Babatunde Fashola, said the government had not only rescinded the decision on abolition of tollgates but has also concluded the designs of toll plazas.
He said: “We expect to return toll plazas. We have concluded the designs of what they will look like, what material they will be rebuilt with, what new considerations must go into them. What we are looking out now and trying to conclude is how the bank end runs. And that is important because we want to limit significantly, if not totally eliminate, cash at the plazas while ensuring that electronic devices that are being used do not impede rapid movement.”
Whatever name it is called, be it tollgates or toll plazas, the bottom line is that the Federal Government is indirectly introducing road tax. Motorists will pay an agreed toll at the road plazas in order to use the roads. Since Nigeria is a country where nobody wants to incur any loss, commercial bus or vehicle operators will most likely pass the tax paid at the tollgates onto commuters or passengers. By extension, all Nigerians would share in the tax, as long as they travel by road, in commercial vehicles or private ones.
From the foregoing, the Federal Government has, therefore, between September and now, served Nigerians notices about payment of more taxes, through increased VAT and road tax collected at toll plazas. Funny enough, while Nigerians are going to pay more taxes, their standard of living is deteriorating. Indeed, I find it curious that the Muhammadu Buhari government is increasing the burden of taxes borne by Nigerians, without showing concern about the implications therefrom.
To show government’s large appetite for taxes, not long ago it queried the chairman of the Federal Inland Revenue Services (FIRS), Mr. Babatunde Fowler, for the drop in taxes. The government was angry that tax returns went down instead of going up and, therefore, wanted to know why FIRS could not meet its target or projection. In his reply, however, Fowler blamed the drop in revenue on recession. He had said: “The Nigerian economy also went into recession in the second quarter of 2016, which slowed down general economic activities,” adding: “Tax revenue collection (CIT and VAT), being a function of economic activities, was negatively affected.”
I do not know if the government was convinced by Fowler’s explanation that tax returns went down because the economy was bad. However, whether government believes him or not, what Fowler said is simple economics. When the economy is good, people do more businesses and make profit. When businesses blossom, their owners make returns to stakeholders and will be in a position to pay taxes. The size of tax, whether big or small, is dependent on the success or otherwise of companies. Companies, in period of economic decline, struggle to survive and meet their obligations. In such situations, companies will pay lower taxes. Therefore, it is in the interest of government for the economy to be good, which is determined by the economic policies put in place and government’s actions.
It is not that the collection of taxes by government is out of place. Not at all! No government will survive without taxes. However, when government thinks only about increasing or introducing more taxes to get revenue, such government obviously shows poor economic initiative. Indeed, any government that thinks only about imposing and collecting taxes from its citizens, without taking measures to boast the economy, is certainly off the mark. It is even worse when taxes are collected but the revenue is not used to provide basic amenities that would make life meaningful.
It is unfortunate that, in Nigeria, people pay taxes, but they do not have facilities that ought to be provided by government from the revenue so collected. In this country, people provide their domestic water from individual boreholes. Here, people provide their electricity, from the generators they run for the greater part of each day, and yet pay outrageous estimated public electricity bills. In this country, people, more or less, provide their security, from the ad hoc arrangement of vigilantes. People build and maintain roads to ensure access to their communities. Yet they pay taxes.
It would be insensitive of government to increase VAT and introduce road tax (tollgate fee) when the economy is not buoyant enough, as this would increase the hardship of the citizenry. It is also insensitive to do so when government has not provided the requisite infrastructure that would cushion the effects or make life better. For one, there should be alternative routes, where roads are tolled, so that those who cannot pay would use them. This is what obtains in other economies. Tolled roads are usually faster to use, which is an incentive to those who pay toll, while the alternatives may have heavy traffic, as more people who do not want to pay use them. If government is introducing toll on roads, where are the alternative routes for those who cannot or do not want to pay toll? Not providing alternatives makes the payment of toll a thing of compulsion, which is not what it should be.
If government wants to make taxes the fulcrum of its revenue generation, it should do things that would make tax payment worth the while. Government must provide necessary infrastructure. Greater effort should be made to fix power, roads and water. Something must be done about transportation. These are basic necessities taken for granted in other countries. When Nigerians see that their taxes are well utilised in the provision of things that would improve and lift living conditions, they will be willing to pay. If government can’t do this or has not shown enough capacity to do so, it should not talk about taxes.