The Federal Government of Nigeria is likened to a story of a farmer, who fortunately was caught up in a situation where he was reaping where he did not sow. You ask yourself, is it possible to reap without sowing? Probably yes, but the seed must have been sown by somebody else.
It was a story of a farmer who bought a goose for the purpose of laying eggs, so he could sell them and earn a living. However, unprecedentedly, the farmer finds out that, instead of a normal egg, the goose was laying a golden egg. The farmer became so rich and at the same time so greedy that, he no longer cares about the asset (goose) but only the golden egg (revenue).
By and by, he could no longer wait for morning to come, to go and pick the golden egg and exchange for a price. The farmer became so greedy that, he wished the goose could lay twice or thrice a day, so that he could generate more revenue.
Due to his penchant for financial growth, he decided to kill the goose, in order to have full access to the golden eggs. Unknown to him, there was nothing inside the goose. In the end, he lost both the asset (the goose) and revenue (golden eggs). The farmer lost everything because, he focuses only on the harvest rather than sowing.
Manufacturers and businesses in Nigeria have been groaning under the burden of multiple taxation in Nigeria, but it seems the government is only interested in reaping without sowing
Manufacturers and businesses in Nigeria have been groaning under the burden of multiple taxation in Nigeria, but it seems the government is only interested in reaping without sowing. Both the Manufacturers Association of Nigeria (MAN), and Lagos Chamber of Commerce (LCCI) have spoken vociferously, and vehemently warned against the negative effect of multiple taxation on the Nigerian economy. It seems FG has turned deaf ear to this red alert.
Early last year, FG introduced N10 per litre tax on all carbonated drinks into the Finance Act, 2021. The new policy was meant to discourage or reduce excess consumption of sugar in beverages, and it was implemented in June 2022. Due to this new tax policy, surveys show that prices of beverages increase by 33 per cent on the average.
In an attempt to increase government expenditure on tertiary education in Nigeria, the President of Association Staff Union of Universities (ASUU) proposed an increase in Education Tax from the current 2.5% to 10%. This would enable the Tertiary Education Trust Fund (TETFund) to mobilise more funds to address the degree of decadence in the tertiary education sub-sector. Before his proposition, the Education Tax was already jacked up by FG from 2 per cent to 2.5 per cent. In the 2022 Finance Bill, the rate has now been increased to 3 percent of company profits.
Also, in a bid to finance free healthcare for the vulnerable group in Nigeria, the Federal Government introduced a telecom tax, which would be charged at 1 kobo per second on phone calls.
This proposal did not go well with some analysts, while others see it as an avenue to combat intractable problems in the nation’s health sector. Their concerns were not limited to just transparency and corruption, but also shenanigans that always shrouded the implementation of such fiscal policy.
Read also: Developments in Nigerian Tax Law 2022
Although, a similar tax policy popped up in the United States of America, where Biden proposed taxes on the rich to cover Medicare expenses. Joe Biden wants to increase the Medicare tax rate from 3.8 percent to 5 percent on income exceeding $400,000 per year, including salaries and capital gains. The atmosphere and economic conditions of the USA may permit such a proposal, but the same cannot be said of Nigeria.
In Nigeria, manufacturers, SMEs, and other businesses are paying through their noses in order to have access to basic public goods that ought to have been provided by the government. In a recent report by Manufacturers Association of Nigeria, MAN, the inability to source for foreign exchange (FOREX) and credit facilities from banks is hindering the manufacturing sector. Erratic power supply has also contributed to the woes of businesses, as MAN says high energy cost is affecting manufacturing in Nigeria.
In all of these challenges, consumers would always bear the burden of the multiple taxation. Investors are savvy enough to transfer the burden of the tax to their customers in the form of an increase in prices. The more the price increases, the lesser the purchasing power and standard of living of the people.
Lastly, the Nigerian minister of Finance, Mrs. Zainab Ahmed, urged the incoming administration to increase the Value Added Tax (VAT) from the current 7.5 percent to 10 percent.
Instead of going by what the minister is saying, I would implore the incoming administration to provide the enabling environment for investors to thrive. Rather than focusing on what could be gotten from tax as revenue, attention towards provision of public goods for businesses should be undivided.
Crowther, an Economist, Researcher and Data Analyst writes from Lagos, Nigeria.
