How the poor funds the rich through unfair taxes

Could it be that Nigeria’s tax and revenue system has turned the poor into tax slaves?

A tax workshop in Port Harcourt for the Niger Delta seemed to veer off a bit to expose deep rots in how taxes and levies may for long be calculated and collected with huge injustice. Participants narrated ordeals and situations that forced out tears and created urgent need to save the poor.

A leading voice was Bridgit Anyafulu, a female activist from Asaba, Delta State, who is believed to also be involved in public administration.

Anyafulu painted a picture of one trader paying about N576,000 in one year, whereas most professionals pay less than N100,000. Yet, the professionals walk about with huge respect by the system whereas the poor on the streets pay far more and are still bullied.

She narrated thus: “Traders are unprotected. Imagine a trader borrows like N50,000 to start a petty trade. Touts will descend on her to collect N2,500 daily in the form of one levy or the other.

“But a lawyer who manages estates for builders and makes over N70m in one year will pay N70,000 as tax and is still highly respected by the tax officials. This is because the real income of most professionals is not disclosed.”

The result, she stated, is that the poor woman trader pays N2,500 per day which amounts to N12,000 per week or N48,000 per month. In one year, she coughs N576,000 into the tax system.

“This is how the poor is funding the rich. It is a story of torture and intimidation.”

Read also: Here are 10 sectors that paid most taxes in Q2

A participant from Abia State revealed why revenue collectors appear heartless and wicked. He said when appointed, they make lumpsum payment to the government and obtain the power to go into the city to recover and make profit many times over.

“They make separate receipts to collect revenue. They account for those in one booklet but hide the collections recorded in the other receipt booklet. Small businesses are the ones feeding the rich. They pay the levies while the rich pay little. See keke people pay big money everyday, too. It’s time to protect small businesses.”

Participants admitted that these ugly practices have tended to obliterate the good intentions of the government in the tax space, making the intentions not to get to the intended targets, being the small traders.

The scenario, they pointed out, is that as government moves out by removing some levies, the touts and non-state actors take over the space by extorting the businesses and pocketing it.

The activists said the tax workshops and advocacy are to protect the SMEs being extorted, and that solving this is the next stage of the tax advocacy.

Leading the charge, Chuks Ofulue, advocacy team lead for the Foundation for Partnership Initiatives in the Niger Delta (PIND), said that the people must be know why they should pay taxes. “SMEs are more compliant on taxes. All they need to know is what to pay and who to pay to and why.”

He talked about nuisance taxes, saying these are close to robbery, saying everything in the informal sector is like robbery.

They said the most ungoverned sector is taxation and that the informal sector is worst hit. “Many dark things happen therein. That is where politicians impact most by forming alliance with the tax agents at the grassroots levels”, a insider from one of the states hinted.

“What is happening at the informal sector is pure robbery, total extortion. It is the meeting point of election fraud where bands help to hijack ballot boxes and be rewarded later as tax agents.

“We must know that 80% of tax problems are in states and LGAs. That is why most people think that what is going on in the states is ransom taking. There is darkness everywhere in the states and LGAs. There is no threshold from which traders will pay. Tax does not seen to be used to help the masses. The taxpayer still solves his problems such as light, water, security, education, health, etc.”

Read also: How Nigeria can boost revenues without raising taxes

Way out:

PIND says it is leading the search for solutions by carrying out a deep study about taxes in the oil region. Some of solutions preferred at the workshop include the suggestion to broker the gap between harsh taxes and absence of harmonsation with relationship. “Let the market leaders get close to the agents for the mean time”, Andrew Banigo, Advocacy Coordinator for PIND advised.

Some of the participants said they can’t see the committee on Ease of Doing Business (EoDB) in Rivers State, while others wondered what happened to the tax harmonization exercised arduously embarked upon and completed by Adaage Norteh, the past executive chairman of the Rivers State Internal Revenue Service (RISR).

Many also called for more investment in awareness and sensitization campaigns.

Kelechi Amaechi Justin (PhD), executive director, Tax Justice, treated the issue of ‘Illegal Taxation and Illegal Levies’ with focus on the Niger Delta.

He discussed tax landscape and said taxation seems to be Nigeria’s escape route after the fall of oil revenue. He called it oil ambush and said oil is now sold ahead or pledged for debts, thus making it difficult to get crude oil to supply local refiners.

He talked about low production of crude oil due to insecurity and theft in the oil region. “So, taxation is only option to the government.”

The harsh effects of illegal revenue collection are said to have led to companies closing shop. It is believed that over 70 companies have so far left Port Harcourt because of tax bands, high cost of diesel, etc. A known fast food company is said to have sacked 300 workers in one day. He harped on how harmful tax system leads to exodus from Rivers State to Lagos, Kaduna, Ekiti, Uyo.

“Rivers State is just recovering. They just launched the USSRS platform to enable people pay as alternative to digital platform. The objective of PIND is to harmonise taxes, attract investors, create jobs, and thus build peace.”

Justin gave the implications of the FG tax reforms saying the FG new tax plan moves the exemption turnover from N25m to N50m. “This new threshold is expected to give businesses more money to operate, make more profit, and create jobs.

“There are exemptions in other items in the tax value chain such as accommodation, transportation, healthcare, education, etc. The aim is to help vulnerable businesses.”

On addressing impact of multiple and illegal taxes, the tax talked about the need to harmonise taxes from federal government to states and LGAs. “Example, road taxes should be paid once instead of paying in each state and LGA you pass through.”

An appeal was raised to request that all professional bodies should come together to help taxpayers challenge taxes in court. “Let there be collaboration with OPS. We look forward to an era of political will but this may not happen until the relationship between election rigging and tax agent business is severed.”

Conclusion:

Multiple taxes are more in the subnational level (states and LGAs). This must be addressed quickly, hence the urgent need to convene a tax workshop on “Tax Policy Reforms for Small Businesses in the Niger Delta.” This was to bring together Business Membership Organizations (BMOs), Civil Society Organizations (CSOs), and other key stakeholders to address the challenges posed by multiple taxation and illegal levies on small businesses across the Niger Delta.

The dialogue focused on analyzing and influencing the implementation of tax reforms aimed at fostering a more sustainable, supportive, and business-friendly environment within the region.