• Friday, June 21, 2024
businessday logo


Who says the poor do not pay tax in Nigeria? (2)

Who says the poor do not pay tax in Nigeria? (2)

Last week, I began examining the erroneous assertion that poor Nigerians, especially those operating in the informal economy, do not pay tax. I showed, with examples from Lagos – and quoted empirical work done in the north – that poor Nigerians operating in the informal economy not only pay a large proportion of their income on tax daily, they suffer from multiple, illegal, and repressive taxation from different government agents or non-state actors. Examples exist in the southeast of Nigeria too.

A report released by the International Society for Civil Liberties & the Rule of Law in 2019 revealed that Nigerian security and law enforcement agencies pocketed as much as N100 billion in roadside bribery and extortion in the South-eastern part of the country alone. So brazen is the extortion that the police and security agencies have now designed specific levies for different categories of motorists across the region with strict enforcement, sometimes ending with police killing motorists and road users for failure to comply.

“For every shuttle or Mitsubishi L300 bus loaded with passengers (only) in Anambra state, it is N50 at every police roadblock, and extra N200 is paid if loaded with goods and passengers” the report found.

“For every commercial motorcycle or tricycle or Datsun or medium range truck loaded with goods, it is N200 at every police roadblock, and for every private vehicle owner accused of “incomplete” vehicle particulars, the least demanded sum is N4,000 or more, which must be paid randomly or on the spot to avoid being dragged to police station and have his or her vehicle impounded and indented as ‘stolen vehicle.”

Of course, those who failed to pay the illegal levy are detained and bailed with illegal bail fees, sometimes upwards of N10, 000.

 So oppressive is the tax rate on the poor that there is usually no more room for the government to impose another fresh round of taxation on them

The report stated that there were 250 police roadblocks in Anambra state between August 2015 and August 2016, and each made an estimated N40, 000 per day. The personnel manning these roadblocks illicitly collected N10 million per day, which translated to N300 million per month and N3.6 billion per year. Although bribes and extortions are higher in Anambra, the same thing applies to all the Southeast states.

A new understanding of the social contract in Nigeria

It is clear from the above that poor Nigerians are overtaxed and the highest taxpayers in the country. So oppressive is the tax rate on the poor that there is usually no more room for the government to impose another fresh round of taxation on them. That is what is being interpreted as unwillingness to pay tax.

Read also: Who says the poor do not pay tax in Nigeria?

However, despite the over taxation or oppressive taxation of the poor, there is absolutely no iota of accountability in the system. This has completely put a lie to the dominant social contract theory that assumes that accountability increases with tax compliance in any society.

Of course, it could be argued that the tax revenues illegally collected from the poor and those in the informal economy do not end up in government coffers and so do not count towards the computation of government revenues. That Nigeria remains heavily dependent on petro-dollars and not the tax of its citizens to run the state – and that’s why there’s no accountability in the system.

Herein lies the problem and the over-reliance on Euro-American theories that explain realities in those milieus but lose their explanatory powers when uncritically engrafted or superimposed onto another milieu. In the case of Nigeria, it is a sophisticated network/coalition of state, informal and fraudulent actors that combine to efficiently collect exorbitant taxes from players in the informal sector and the poor. The main distinguishing feature here is that not a penny of these taxes collected makes its way to state coffers. In most cases, the main actors who collect both the legal and illegal taxes are the same. In other cases such as that of Lagos, government/political leaders empower the non-state and fraudulent actors to collect those taxes.

But even if we are to accept the aforementioned argument – and we are not – the theory of taxation and accountability will not apply in Nigeria. Look at Lagos for example. Over 50 percent of its revenues comes directly from taxation – the only state that has been able to achieve such a feat in Nigeria. If the theory is correct, we should begin to notice greater demand for and rendering of accountability by the Lagos state government. But the reality is that Lagos remains the most opaque state in the country with zero accountability. Despite all the legitimate taxes collected, the state government never publishes its audited accounts and refuses to supply any freedom of information requests about its revenues or expenditures. It’s standard reply to any FOI request is that the bill, passed and signed into law in 2011, “does not have automatic application in Lagos state and it has not been domesticated in the state by the State House of Assembly,” even when various court judgements expressly stated it applies to the entirety of the country without exception.

What is more, Lagos state is perhaps the only state in the country where the entire government machinery is controlled by a single individual and he alone determines and decides who occupies whatever elective or appointive position in the entire state. Consequently, all public officials in the state are only responsible and accountable to him alone and not to the taxpayers in the state because only that individual determines their fate and not the so-called electorate.

Clearly then, the taxation/accountability theory of the social contract does not apply to places like Nigeria where in classic Ekeh speak, two public spheres exist side by side and where societal and social relations are moderated by a complex interplay of the two publics. It’s time to refocus on closely observing the African society as it is and from there develop theories that explains it rather than trying to engraft foreign theories with little or no explanatory power onto it.

I wish you all a happy New Year!!!!