Business
Economic Reforms: Taxing Nigerians to the hilt?
When, in July 2023, President Bola Ahmed Tinubu set up the Presidential Fiscal Policy and Tax Reforms Committee (PFPTRC) to overhaul Nigeria’s fiscal system, many Nigerians became expectant that sooner than later the irksome subsisting multiplicity of taxes would be over. However, sixteen months down the line, rather than the problem abating, more new taxes are being introduced, even as real and imaginary ‘subsidies’ are also being removed on sundry utility services.
The Presidential committee chaired by Mr. Taiwo Oyedele, has the core objectives of harmonizing multiple taxes and levies, simplifying tax system, leveraging technology for revenue administration, and removing tax provisions that hinder business and economic growth. In the end, the work of the committee is expected to boost citizens’ tax morale (now at a very low ebb), promote tax culture, and drive voluntary compliance.
In specific terms, the output of the Oyedele-led committee is expected to culminate in the repealing of existing taxes and levies, and be replaced by harmonized tax laws. It is also expected to bring into being a fiscal risk framework for efficient fiscal governance, as well as create an enhanced revenue administration system. The work is also expected to give rise to the establishment of a Federal Office of Tax Ombudsman and Tax Simplification.
Although the committee’s work was expected to be completed in one year with some ‘quick wins’ deliverables, such an expectation was largely dashed. Apparently, the panoply or plethora of reforms of the Federal Government in the past seventeen months largely swamped the report and impact of the PFPTRC. Although the entire report of the panel wasn’t made public, to the chagrin of most Nigerians, what has been coming from the Government are a variety of new taxes or their propositions.
Thus, even while the tax bills inspired by the committee’s work are still before the National Assembly for legislative consideration, the Federal Government has been unleashing a number of new taxes and levies on various sectors and segments of the polity. In point of fact, at no time before had Nigerians been subjected to all manner of taxes and levies (ranging from the mundane to the ridiculous) than nowadays.
Currently, four tax bills—emanating from the work of the Oyedele-led panel—are lying before the Federal legislature. These are the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill. While these bills are yet undergoing legislative procedures, new taxes and levies are being churned out.
Shockingly, not a few of these new taxes and levies are retroactively enforced. For example, the outlandish “windfall tax” on deposit money banks (DMBs), very unpopular as it is, is to be retroactively effective from 2023. It was enacted in July/August this year. Till date, this unprecedented hue of tax in the Nigerian economic landscape keeps attracting the ire and opprobrium of stakeholders and the entire populace. Indeed, the method of its implementation remains foggy and irksome; but it is being enforced, anyhow.
Again, contrary to the well-known intendment of the financial inclusion policy of the Federal Government for over two decades now, the current administration is almost at the point of torpedoing the noble initiative. Under the orgy of new taxes, the Federal Government has introduced a Tax Identification Number (TIN) verification platform, making it mandatory for Nigerians to link their TIN to existing bank accounts or provide it when opening new ones.
According to the Federal Inland Revenue Service (FIRS), all bank account holders have up to December 31, 2024 to obtain and get their TIN linked to the platform. Failure to do this would lead to account restrictions or freezing; inability to operate existing accounts. It could also lead to difficulty in opening new accounts as well as some tax penalties.
This singular policy, apparently intended to bring all Nigerians into the Federal Government’s tax net, has the potential to turn a deterrent to the spread of banking habit and culture. It will therefore be encouraging financial exclusion—leading to the return of ‘olden days’ when people leave their monies under their pillows. Or have them buried within and/or around their abodes.
Forced TIN-link to bank accounts directly translates to coerced enlistment for taxation as was done in the colonial days, with its attendant social upheavals—including stiff resistances, protests and skirmishes. Many of such ‘forced taxation’ turmoil are known to have even led to wars of sorts!
The Federal Government of Nigeria since the inception of democracy in 1999 has been implementing financial inclusion strategy. The policy is intended to include everybody in the society by giving them basic financial services without looking at a person’s income or savings. Financial inclusion mainly focuses on providing reliable financial solutions to the economically underprivileged sections of the society without having any coercion.
Still, in the mode of taxing Nigerians to the hilt, the Federal Government earlier this year had to ‘fly a kite’ by announcing the imposition of what it termed Cybersecurity tax. Government said the tax was to fund national cybersecurity initiatives and address growing cyber threats. Under the tax policy, a certain percentage of levy is to be charged on every bank transaction carried out electronically. The tax rate is specifically 0.5% of all electronic transactions. However due to outcry and concerns about the economic implications of such a tax, it was ‘suspended’ via a Presidential fiat.
Without a doubt, one of the direct economic implications of the cybersecurity levy, if implemented, would have been a deterrent to cashless economy initiative. This is because if people have to pay tax by utilizing digital channels in their banking transactions, they certainly would look for other alternatives. This could translate to aversion to banking and digital transactions generally—a veritable counterpoise to cashless economy efforts.
In the guidelines towards the collection of the cybersecurity levy, in May 2024, the Central Bank of Nigeria (CBN) had said that “financial institutions are required to deduct the levy at the point of electronic transfer origination and reflect it in the customer’s account with the narration “Cybersecurity Levy.”” Also, deductions were to commence within two weeks of the CBN Guidelines (issued on May 6, 2024) “with monthly remittances to the National Cybersecurity Fund (NCF) account domiciled at the CBN by the 5th business day of every subsequent month.” Indeed, all were really set!
The move by the current administration to implement the cybersecurity levy drew so much public ire especially for its timing. Worthy of note is the fact that the levy has been in the tax laws since about 2015, but the current administration unfurled it for implementation apparently in desperation for improved revenue generation. Yet, the Government had on not a few occasions, assured Nigerians that it won’t be imposing new taxes and levies on the citizenry anymore.
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Today, apart from the numerous taxes and levies, the Government has through the removal of real and imaginary ‘subsidies’ on a number of goods and services increased the financial burden on the people. Under the guise of subsidy removal, the Federal Government had come up with the hiking of electricity tariff. The Nigerian Electricity Regulatory Commission (NERC) said it introduced the Service-Based Tariff (SBT) to ensure that electricity tariffs paid by end-users reflect the quality of service delivered by Distribution Companies.
However, despite the hiking of the tariff by over 300% for various bands (of consumers), the quality of electricity supply has been deteriorating rather than otherwise. Since after the tariff hike, hardly has any week passed without the national grid collapsing, leaving the entire country in pitch darkness for days. Same applies to fuel subsidy removal in May 2023.
From below N200 per liter of Premium Motor Spirit (PMS) in May 2023, the price the commodity has been surging, hitting over N1100 per liter in various parts of the country by end-October 2024. This has caused quite a lot of macroeconomic distortions: runaway inflation, rising poverty level, worsening misery index, spiraling cost of transportation and foodstuffs, and collapse of consumer purchasing power, etc.
With all these, perhaps only the few Nigerians that survive the prevailing hardship would get to the whimsical Eldorado. But in the words of the revered Economics Nobel Laureate, Maynard Keynes, “in the long run, we are all dead.” After all, economic policies are for the living. And certainly not for the dead!
- The author, Okeke, a practising Economist, Business Strategist, Sustainability expert and ex-Chief Economist of Zenith Bank Plc, lives in Lekki, Lagos. He can be reached via: obioraokeke2000@yahoo.com (08033075697) SMS only