The Federal Government of Nigeria is likened to the 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, the farmer finds out that instead of normal eggs, the goose was laying golden eggs. The farmer became so rich and at the same time so greedy that he no longer cared about the asset (goose) but only the revenue (golden egg).
At a point, 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 focused only on the harvest rather than sowing.
Manufacturers and businesses in Nigeria have been groaning under the burden of multiple taxations in the country, but it seems the government is only interested in reaping without sowing. Both the Manufacturers Association of Nigeria (MAN) and Lagos Chambers of Commerce (LCCI) have spoken vociferously, and vehemently against the negative effects of multiple taxations on the Nigerian economy. It seems the FG has turned deaf ears to this red alert.
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Early last year, the 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 Academic Staff Union of Universities (ASUU) proposed an increase in Education Tax from the current 2.5 to 10 percent. 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 had already been jacked up by the FG from 2 to 2.5 percent. 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.
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 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 the Manufacturers Association of Nigeria (MAN)’s 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 taxations. Investors are savvy enough to transfer the burden of the tax to their customers in the form of 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, has 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.
Oluwole, an Economist, Researcher and Data Analyst, wrote from Lagos
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