SIR: The federal government 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:, is possible to reap without sowing? Probably yes, but the seed must have been sown by somebody else.
Manufacturers and businesses in Nigeria have been groaning under the burden of multiple taxations 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 economy. It seems the federal government has turned deaf ear to this red alert.
Early last year, the federal government 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 increased by 33 per cent on the average.
In an attempt to increase government expenditure on tertiary education, 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 decadence in the tertiary education sub-sector. Before his proposition, the education tax was already jacked up from two per cent to 2.5 per cent. In the 2022 Finance Bill, the rate has now been increased to three percent of company profits.
Also, in a bid to finance free healthcare for the vulnerable group, the federal government introduced a telecom tax, which would be charged at one 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.
Although, similar tax policy popped up in the United States of America with President Biden proposing taxes on the rich to cover Medicare expenses. The US president wants to increase the Medicare tax rate from 3.8 per cent to five per cent 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, 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 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 an increase in prices; ironically, the more the price increases, the lesser the purchasing power and standard of living of the people.
Lastly, the minister of Finance, Zainab Ahmed, urged the incoming administration to increase the Value Added Tax (VAT) from the current 7.5 per cent to 10 per cent.
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 Crowther,
Lagos.