The government’s intention of raising more revenue from new taxes may have hit a brick wall as some Nigerians have condemned the action, insisting that it would damage the economy further and impose more hardship on the people. The new taxes and levies are proposed in the 2022 Finance Bill before the National Assembly.
In the Finance Bill, the government proposed five new taxes and levies in a bid to improve its revenue, which has been under pressure as a result of instability in global oil price; and the devastating effect of Covid 19 pandemic, and growing size of recurrent expenditure, which has led to steady increase in budget deficit.
Finance minister, Mrs. Zainab Ahmed, who gave this indication while speaking on the Finance Bill, said that though the ongoing fiscal reforms of the past six years were yielding tangible results, the government was considering more taxes, tariff and levies to boost its revenue. She spoke at the one-day public presentation at the House of Representations.
According to her, the Bill proposes to amend the Capital Gains Tax Act, Company Income Tax, FIRS Establishment Act, Personal Income Tax, Stamp Duties Act and Tertiary Education Act, Value Added Tax, Insurance Police Trust Fund and the Fiscal Responsibility Act.
It will also amend the Police Trust Fund Act and the Nigerian Trust Fund Acts to empower the FIRS to collect the Nigerian trust fund levies on companies on behalf of the fund itself.
While hinting on the need to diversify the oil economy, Ahmed stated that as of September 2021, the federal government’s retained revenue was N4.56 trillion, achieving 75% of the budget.
She added that the federal share of oil revenue was N845 billion representing 56.3% pro-rated performance.The federal share of non-oil revenues, she said was N1.31 trillion, 117.3% above budget.
She pointed out that Companies Income Tax (CIT) and Value Added Tax (VAT) collections were N616 billion and N274.4 billion representing 121% and 153%, respectively, of the pro-rata targets.Nigerian Customs Services collections, the minister said, were N418.97 billion.
She said: “Clearly, our ongoing fiscal reforms of the last six years are yielding tangible results. However, the Federal Ministry of Finance, Budget and National Planning is closely studying the following issues, developments and policies: Legal developments and pronouncement of the Courts on VAT vs. States Sales Taxes Cases.
“We prepared this draft bill along five reform areas, the first domestic revenue mobilisation, the second is tax administration and legislative drafting, third is international taxation, fourth is financial sector reforms and tax equity and fifth is improving public financial management reform.
“Currently, because there is no such provision, the FIRS is unable to start collecting on behalf of the fund. Also, it is to streamline the tax and the levy collection from the Nigerian companies in line with Mr President’s administration ease of doing business policy. So, we do not have NASENI going out to collect that tax, the FIRS will collect on their behalf during their collection process and it will be passed through to them.”
Earlier in his address while declaring the hearing open, the Speaker of the House, Mr. Femi Gbajabiamila said that reckless borrowings must be checked by ensuring accountability.
He added that the bill will help plug the financial loopholes to stop wastages.
“Essentially the 2021 Finance Bill seeks to introduce strategic and broadminded, positive reforms that will engender best practices, statutorily check borrowing by local, states and Federal Government, enhance transparency and accountability in the administration in various strata of tax and public revenue generation, while at the same time guaranteeing the interest of the investing public and businesses.
“It is instructive to state that the essence of the 2021 bill is to further reposition our finance system to plug wastes, close openings for corruption, create opportunities for employment as well as stimulate stability and growth in our productive sectors, within the wider context of our quest for economic recovery in our country.
“Given the democratic credentials of the House of Representatives under my watch as well as the need to further deepen the credibility of the process through wider participation of stakeholders, this stakeholders meeting has been designed to give Nigerians and critical stakeholders in the industry the ample opportunity to own and drive the process.
“It is on this backdrop that I charge this stakeholders meeting to extensively scrutinize the templates in the bill in the general interest. We must strengthen the institution to strategically check reckless borrowings by ensuring accountability in the use of borrowed funds and ensuring that the borrowings shall be on concessional terms or at relatively low interest rates and subject to the rigours of legislations.
“The stakeholders should also consider the issues of chargeable gains as they affect individuals and companies in some of the proposed laws so that we will achieve our aim to enhance transparency, accountability as well as engender a credible and favourable business environment for growth in our economic productivity”, Gbajabiamila said.
However, Organised Private sector operators comprising Chambers of commerce, manufacturers Association, Employers etc last week in different position statements condemned the proposed taxes, insisting that they are recipe for further emasculation of the economy and impoverishment of Nigerians.
They individually and severally charged that the private sector could not absolve further taxation given the already multiple taxes and depressed economy in which they operate.
Speaking with this medium, Mr. Teslim Shitta Bey, managing editor of Proshare, a digital business and economy platform, sees the matter of more taxes as straight-forward. The obvious culprit is inflation which in turn has many different ramifications.
“If we discount the inflation figures released by the National Bureau of Statistics, NBS, as politically tainted, because prices are still going up when the composite inflation rate is coming down; then more taxes would worsen inflation with multiple effects on the economy and the lives of Nigerians.
“When inflation is high and rising, savings and disposal income would disappear; and without savings there would be no investment, and without investment there will be no employment. At present, unemployment and underemployment is at almost 56 percent one of the highest in the world.
“Government should be seen to be promoting policies that would improve the economy, not worsen the problems. More taxes can only be worsen for the economy and Nigerians. Why government decided on this path of economic policy defies logic and elementary economics.
“You raise taxes when the economy is experiencing expansion to avoid inflation and overheating the system; but to impose taxes in a depressed inflationary economy is like beating a man who is dying. It is not true that Nigeria is undertaxed; that can only be so officially or in terms of formal taxation.
“Nigeria is a high taxation society, and this is responsible for the instability in prices. A whole lot of informal taxes go on every day, once the goods leave the farms till they are purchased by the end users. All sorts of state and non-state actors intervene in the distribution chain to extort financial returns from the system, which distort the price mechanism.
Chief Emma Nwosu, an economist and former ban chief, is at a loss why government is treading such ruinous path.
“It is a pity that government is even contemplating such action, because there is no viable explanation for it. This is economy is already in big trouble with low revenue, high overhead and huge debt; to add more taxes to this situation is simply unthinkable.
“More taxes will worsen everything we have today – inflation, unemployment, economic hardship etc. They are doing this to raise money for consumption, when they are borrowing blindly; this government has built up huge recurrent expenditure and now they can’t pay for it.
“This government has been reckless with our finances and they are making everybody to pay for it,” he said, adding, that next year (2022) will be worse than this year; and all the projections of 4.5 percent GDP is wishful.
“How can the GDP attain 4.5 percent with the removal of subsidy, high exchange rate, inflation, lack of investment? It is wishful thinking. GDP is only a projection for an elastic economy; it does not work in an economy thatproduces very little or nothing, and everything depends on oil export.
“Investors are leaving in droves because the perception of the government is negative and they are sitting on the fence to wait him out; and until he leaves, there will be no change in the economy; it will even get worse”, he said.
