What options are available for state funding (II)

Continued from last week

Taxes

I deliberately used the word Taxes, just to blindside us a little. Both government and the governed usually think only of ‘taxes’. But taxes don’t have to be called ‘taxes’. And they don’t have to be a huge burden on payers. Small rates of taxes are better for collection. And we know that the core issue for Nigeria is the way the taxes are spent. If Aba women could riot over oppressive taxes in 1929, it is only our ‘modernization’ (our American dream illusion) that is preventing us today. Nigerians need to be on the streets protesting the current unimaginably blatant way our ‘taxes’ are spent on nonsense. Our ‘lucky’ government officials – politicians and top civil servants – are enjoying an unwarranted and unprecedented level of luxury based on the ‘taxes’ that we pay. It’s not like this anywhere else in the world. The other day I was having a discussion with some guys on social media over whether presidential contestants should try and use the roads to at least know what our people are going through. It was surprising how many normal Nigerians believe that it was okay for government officials or top politicians to fly rather than use the roads, and that extends into government officials avoiding our public schools for their children while patronizing the best abroad, or hospitals abroad while neglecting the ones here. Shocking indeed that many of those complaining of bad governance on social media would actually be part of the oppressors or already are. The golden rule in good governance is that public officials MUST use the services they provide otherwise it never gets better. At least they need to get first experience of what is happening. The situation right now is that the entire nation is a disaster zone. Drop a foreigner here from a country anywhere in Europe and they would marvel at our level of backwardness as reflected in our public facilities. 

However my qualification of the word ‘taxes’ needs to be explained. The fact is that government can hide little amounts in different avenues for collection and that would be part of its revenue. It is even smart for government to sometimes ignore the raw taxes that people avoid the most (PAYE or Company taxes), and collect other revenues like rates, fines, fees, levies, duties, and charges for use of facilities. Technology can be deployed to ensure collection as we have seen lately with the TSA and other initiatives. The government is already doing something like this with our VAT. It may be 5% today but what people do elsewhere – even in Ghana where it is 17.5% – is to net off every year i.e. you deduct what you paid from what you collected and remit the rest. Here they collect 5% from all sides and on almost every transaction. So effective rate is at least 10% – or more for those who don’t collect any VAT on behalf of government. 

For the states, the trick is to organize society by enforcing fees, fines,  rates, charges, duties. A state where people know their limits, where one-way driving attracts stern fines, or illegal dumping of waste, and where people know that they have to pay manageable fees for use of some government facilities would actually be an organized state and would attract tourism, be rid of crimes, and make progress. It’s as if many of our governors are too busy chasing bigger fish to be bothered about these lines of cash-flow. 

Solid minerals and the exclusive list

Many aspirants for governorship positions today would readily hinge their quest to transform states on the ability to mine solid minerals. It is a bright idea but as an accidental environmentalist I do have some issues against digging up vast amounts of the land in search of these minerals. Here we don’t have good regulations around the environment. What is more? We usually dig up those minerals just to sell abroad. We don’t care what they are used for there, and often promptly import the same minerals back in expensive finished products like phones, TVs, cars and so on, in a perpetual marriage to trade imbalance and deficit. Also, as it is in other sectors, technology has evolved in mining, and we cannot hope to compete in this area, using decades-old thinking. I believe mining of solid minerals should be a business-driven idea but regulations must be super-tight as this is often an area replete with disputes and sharp practices. 

Governors are complaining about the extent of the exclusive list. Some researches have revealed that this may not be a particularly big issue because states have got involved in sectors like rail and power, which are supposed to be exclusive to the FG. Still the list should be reviewed and lessened. Also the 56% of the federal allocation must be reduced to no more than 20%. The federal government has obviously lost grip of its construction and maintenance of infrastructure around the country. It should begin to hand off. State governors too should begin to show vision and foresight, enough to be trusted with much more resources. 

That said, pending when we can amend laws, smart governors should continue to chip away at the exclusive lists and stand up for their people. And they should start by inspiring confidence through the choices of lifestyle they adopt. 

To be continued