Tag: taxation

It is strange that the new tax laws, and the motivation behind the structural reforms, are being twisted by armchair critics and opposition figures who know the truth but prefer to deny it.

But the resistance is futile. The law became operational in the first week of the year, and the general public is not fooled by the falsehoods from detractors, saboteurs and fraudsters who prefer “business as usual”.

Having failed to halt the passage of the legislations by the National Assembly, opposition leaders, who may not have even bothered to study and digest the Act, have curiously regressed into manipulative propaganda aimed at whipping up emotions in a bid to incite Nigerians and discredit the government.

Ahead of the electioneering, the opposition is losing ground and destructive criticisms have replaced civilised scrutiny. They, therefore, seek short-lived collaboration with their confederates in the business environment. These lackeys perceive that their interests are at risk because the curtains are being drawn on long years of their mindless economic sabotage.

In the coordinated attacks, a lawmaker stood up during plenary to allege a gap between the Bills passed by the National Assembly and the one assented to by President Bola Ahmed Tinubu. Up to now, he has not provided the proof of doctoring, alteration, or padding in the law to reinforce his allegation.

Shockingly, African Democratic Congress (ADC) leader Atiku Abubakar seemed to have taken up the fight from there, alleging that the gazetted laws contain unauthorised alterations, which, in his view, amounted to forgery and a “grave constitutional issue”. He called for a fresh legislative vote rather than re-gazetting to correct what has paled into imaginary discrepancies.

When the former Vice President alluded to a compromised or flawed process that undermined legislative authority, Nigerians knew that he was playing his peculiar brand of politics.

READ ALSO: How to budget for 2026

The 2027 electioneering, to political actors outside power, is nearer than imagined. In Nigeria, there is hardly a demarcation between politics and governance. Politics has ceased to be a vocation. It is now a full-time occupation of economic value. This has its implications for the ballot box war, often fought with bitterness and desperation.

The concern of the former Vice President may not be whether or not the combined tax laws conform to the cardinal principles of fairness, certainty, convenience and efficiency. The fear among the political foes of the government is that the success of the bold and brave reforms may enrich the scorecard of the administration and increase its popularity ratings among the voting public.

The Nigeria Labour Congress (NLC) may have also turned itself into a partisan party when it rejected the laws, which it grudgingly labelled a “distorted,” regressive, and unpatriotic enactment that can cause further hardship for workers. NLC President Joe Ajaero demanded a review, alleging lack of consultation and calling for the suspension of the “unpatriotic” tax policies that lack the face of justice. The union leader omitted the benefit of exceptions. He also failed to explain how renaming the Federal Inland Revenue Service (FIRS) to Nigeria Revenue Service (NRS) can affect workers’ welfare.

But the attention of Nigerians, particularly those from the financial sector, was arrested by the KPMP’s analysis, which alluded to what it called multiple errors and gaps in the consolidated laws, which the reputable firm apparently failed to point out earlier during the consideration of the Bills at the parliamentary hearings and perusals.

To the extent that the firm could not adequately avail itself of the opportunity of pointing out those hidden gaps and errors, particularly during the public hearing organised by the National Assembly, some observers tend to argue that the firm’s post-assent observation is an afterthought meant to perforate an iron-cast legislation designed for the benefit of the masses.

Certain professional firms are indeed entitled to engagements with policymakers and drivers to foster an understanding of the scope, focus, and limitations of the legal frameworks and the basis for improvement. Since society is dynamic, such interactions may be essential to the evolution of new ideas in aid of the current law, thereby making strategic amendments imperative in the future.

As the implementation of the law was about to commence, business barons and other tax evaders, who perceived themselves as the targets of the visionary and revolutionary initiatives, became weary to stand on the way until their propaganda overwhelmed the low-income earners, taking along the gullible.

The trick was to mobilise the poor and the indigent and expand the scope of feeble resistance to the pieces of legislation that do not have the potential to hurt even the middle class.

But the gap in constructive criticisms remained open due to the deliberate omission by subjective critics of the N800,000 annual tax-free threshold. If an intervention by a tax regime does not bridge or close the gulf between the rich and the poor, it is not meaningful and progressive. Here lies the friendliness of the law, its captivating beauty, its human face, its human heart and milk of human kindness.

The significance of the tax reforms is the relief to the masses – the average worker – through the increased disposable income achieved through the exception. Taxes on rent and essential electronic transfers below ₦10,000 and multiple taxation on small businesses have been removed. The goals is to lower inflation, foster equity by taxing high earners more, and boost infrastructure investment.

As small companies with lower turnover are exempted from certain taxes, they are allowed to grow, and the threshold for company income tax is increased to ₦50 million yearly. If all these are properly explained to the average worker, the propaganda of those enlisting them into an unnecessary battle against the Federal Government would be futile.

If, in pursuance of harmonisation and greater efficiency, the small taxes at federal, state, and local levels are merged, would the burden on small traders and informal workers not cease?

If stamp duties are removed for many, and electronic money transfers below ₦10,000 are also exempted, would daily transactions for the average person not be smooth?

If higher taxes on large corporations and wealthy individuals are designed to fund efficient public services, infrastructure, and social amenities, is it not in the national interest?

If the projected five-year tax exemption for companies in the agricultural sector is achieved, would it not lower food prices and boost food security?

Since these tax reforms are designed to shift the focus from taxing poverty to taxing prosperity, the burden on the average Nigerian is reduced while national economic stability is enhanced.

The fear of taxation, right from the beginning, has always motivated individuals and organisations to dodge the patriotic duty of payment. A great advantage is the push towards economic formalisation, and the large informal sector, which often made revenue collection a herculean task, is tracked. The expansion of the net is bound to reshape the economy.

To many analysts, the Tinubu administration has effected a paradigm shift by halting the fragmented, old-fashioned, and inefficient tax system that has not yielded optimal revenue and continued to sustain the poor fiscal environment that frustrates growth.

The hidden Value Added Tax (VAT) is removed from consumer prices, but input VAT on assets and overheads is reviewed. The VT rate, still at 7.5 per cent, presents a more competitive outlook than the 15 per cent in Ghana, 16 per cent in Kenya, and 15 per cent in South Africa.

Also, the moderate cut in corporate income tax rate to 25 per cent is more favourable than the 30 per cent in Kenya, 27 per cent in South Africa, and 25 per cent in Ghana. Also, the five per cent excise tax on airtime in Nigeria has been reversed, compared to 15 per cent in Kenya and five per cent in Ghana.

Accordingly, the top marginal tax rate for high-income earners is 25 per cent in the country. It is lower than the 35 per cent in Ghana and Kenya or 45 per cent in South Africa. Nigerian small-scale businesses pay a zero per cent corporate tax rate compared to about three per cent of turnover in Kenya and Ghana. A feature of the VAT design is the widening of the input VAT recovery to assets and overhead as tax administration and compliance become more digital, with much reliance on tax intelligence and risk-based audit.

Another advantage is the introduction of clearer guidelines for taxation, which would encourage businesses and individuals to register formally. The path to formal financial services, credit facilities, and government support programmes is open to individuals and small organisations. The beauty of formalisation reflects in the resultant transparency, the reduction of bureaucratic bottlenecks, and greater opportunities for wider participation in the economy. The overall result is the anticipatory increase in the Gross Domestic Product (GDP) through a proper focus on production in a conducive economic climate.

If over 90 per cent of micro and small businesses are out of the “tax-paying” bracket for major taxes – Companies Income Tax (CIT), Capital Gains Tax (CGT), Withholding Tax, VAT, and Development Levy – leading to lighter compliance expectations, and big businesses pay more, there is a reduction in gaps that tend to promote fairness and equity. By ensuring that higher-income individuals and profitable corporations pay more, the pressure on low-income earners is removed.

As wealthier citizens contribute proportionally more to national development, resources are redistributed without the regression to subsidy, which is appropriated by the rich.

Also, the opportunity for investment and business growth is enhanced through incentives to investors in many sectors, such as technology, manufacturing, agriculture, and renewable energy. Indeed, as anounced by the tax curator, Taiwo Oyedele, all investors in the capital market are eligible for capital gains tax exemption with over 99 per cent exempted unconditionally based on a threshold of N150 million proceeds and N10 million gains in any 12 months’ period.

Nigerians can now track how tax revenues are utilised, thereby holding both government and corporate bodies accountable. The added benefit of transparency is that projects that benefit citizens, such as hospitals, schools, and other public infrastructure, can better be funded by the government.

However, public enlightenment about the essence of taxation should be intensified. This will puncture the misinformation and disinformation machination of opposition figures who, for long, have been the major parasites on the economy and the nation’s astute biggest tax evaders.

Taxation has always thrown up intrigues about the suitability of the rate adopted and the ability of the payers, notwithstanding the type of system the country or society practised.

From time immemorial, taxation has been woven around the experiences and history of nations, connecting them with the prevailing system of government.

Its enduring feature is certainty. The reason and method of payment are known and agreed upon by the authority and members of a given community or state. It was a time-tested tradition; it was law.

However, taxation in primitive societies was characterised by arbitrariness. It must be paid, whether it was convenient or not. Also, the law of taxation in those days never took into consideration the modern principle of fairness. To the monarch, chief or emperor, the ability of the individuals to pay was a non-issue. Payment was non-negotiable.

Under such a traditional political system, evasion was common because the payment of tax was perceived as an avoidable burden and a cruel rip-off. Taxation, in some instances, also sparked rebellion and resistance because it was associated with fraud due to the deficiencies in its remittances.

Tax, under any system, was collected by force or intimidation. There was no strict formula for determining the levy by monarchs, whose collectors or tax masters were ruthless, unsparing and deaf to complaints.

Read Also; TARABA CHURCH CRISIS: Warring parties in fresh battle for control of headquarters

The traditional rulers relied on the tributes, tolls and levies as their sources of income and sustenance of community’s treasury. There was multiplicity of separate levies, irregular imposition and arbitrary assessment, which could not be questioned by the ordinary folks. Complaints were viewed as treachery and a mark of disloyalty punishable by imprisonment.

Taxation was a prime duty and a unifying factor. It was also a measure of the health of the primordial economy. There was a basis for funding community projects – building of township fence, palace and prison, community hall, and levying of war. Maintenance of soldiers, which was critical to regime protection, was sustained by tax.

In the empires of yore, when agriculture was the mainstay of the rural economy, the kings insisted on the payment of “Isakole” (tribute) from the people of his community and environments. It could be agricultural yields or domestic animals. The period of payment was during the harvest. The inability to pay, either due to dwindling fortune or crop failure, was mot condoned. It was equivalent to refusal, violation of the royal order and an affront to the community. It was a grievous offence that attracted a stiff penalty.

Tax offenders were publicly shamed and punished, like going to the king’s farm to till the ground for a season. The property of defaulters might be seized and they had to be ransomed later through hard labour.

In some towns, offenders were publicly flogged. Those who could not pay were labelled as unproductive. Even marriage, which was a validation of adulthood, was often tied to the payment of tax. Only few parents would allow their daughters to be married to lazy and idle men who could not pay tax, which meant that they were not responsible and could not be trusted to properly raise families.

Since tax was the king’s main source of revenue, defaulting vassal communities risked wars, which in those days were disastrous. In the course of the onslaught, the unfortunate communities paid more. Their able-bodied men, wives and children were taken as slaves and they became labourers in captivity, until they worked for their freedom in a hard way. Not all the victims were lucky. Some of them never returned home. They were either married or sold off to other distant towns and villages as slaves.

As colonial interlopers invaded Africa, the British, for example, came with the idea of paying tax, using coins and currencies, which replaced cowries, articles of trade and farm produce.

The motive never contrasted with the objective of pre-colonial taxation system. The need to generate revenue for the running of the government at all levels and provide and maintain public infrastructure became more compelling as the colonial masters expanded the bureaucratic functions of the colonies.

British taxation in the colonies was burdensome and exploitative. Defaulters were fined, publicly shamed and imprisoned. The condition of payment was stressful. That was the situation in Ibadan where Chief Adebisi Idikan, a rich farmer and trader, approached the Resident to stop troubling all male adults, promising to be paying their annual taxes.

The Divisional Officer and Resident marvelled at the singular decision to shoulder the huge responsibility. The rare act of philanthropy brought relief and restored normalcy to the sour relationship between Ibadan people and the colonial authority.

In Abeokuta, taxation was the source of a quarrel between Egba women, led by Mrs. Funmilayo Ransom-Kuti, and the Alake, Oba Ladapo Ademola II. As the aggrieved women protested daily, tension engulfed Ake, the seat of Egba Confederation. The crisis was so widespread that the monarch had to embark on voluntary exile for two years.

After independence, many Nigerians were still reluctant to imbibe the culture of taxation. People continued to evade tax, believing that it was a burden deliberately imposed by the government. Entreaties that the money was used to provide social infrastructure fell on deaf ears. Many people went into hiding in their farms, in ceilings, under their beds, stores and kitchens whenever the tax collectors came calling. Again, the negative feeling towards tax was fuelled by the corruption associated with its collection and remittance.

In the mid-1950s, the old Western Regional government increased taxes to get more money for funding free education. The opposition went to town with a curious propaganda that worked. During the federal elections that followed, the opposition used the issue against the ruling party. The voters were swayed, and the ruling party lost many seats in the central parliament.

As from 1970s, the government devised a method of “stop and search” to enforce compliance in some old provinces and states. At the sight of revenue officials, defaulters scampered into the bush. Some sneakily ran off the vehicles conveying them; others agitatedly disembarked from their bicycles and motorcycles.

However, as the civil service expanded, government devised the Pay As You Earn (PAYE) system. Through this method, taxes were deducted from the salaries of civil servants and remitted to the government. But, in the private sector, many companies continued to default as they do in the contributory pension scheme.

Up to now, most Nigerians do not pay taxes, for many reasons. These range from the inability of the government to properly track taxable individuals and corporate bodies as well as the evasion of tax payment by many wealthy citizens. This borders on corruption: using unscrupulous government officials in the tax offices to issue doctored tax certificates, among other dubious practices.

Some have argued that Nigeria  accommodates many private jet owners and other “billionaires” who evade tax because of their closeness to some “powerful” government officials that aid the unpatriotic indulgence.

Tax assessment is a herculean task. In the metropolis where many companies operate without signboards. Many are unregistered. Thus, they are not legal entities with valid addresses.

What is very striking now is that despite the transparency of the modern tax governance, the politics of distribution has led to suspicion between two groups of stakeholders – those pushing for distribution based on derivation and those pressing for sharing on equal basis.

 There is a general agreement that public revenue should be raised for known and agreed purposes. However, the emphasis is not on how the tax is generated; the bone of contention is how the lump sum is distributed among the states. Some states contribute so much and get so little; some contribute sparsely and get the big portion. There is institutional reward for lack of productivity.

No doubt, the capacity for generating the Value Added Tax (VAT) is skewed or lopsided. This may be due to the fact that states are not equally endowed or lack equal capacity to contribute to the pool.

The complexity of the situation is underscored by the fact that the seemingly disadvantaged populous sub-national units press, not for equity, but for equality in the sharing of proceeds. The populous advantageous units are blackmailed. Both bloc zones of the North and South are represented, but not equally, in the parliament where the law is to be made. There is peculiar bullying through the deployment of numerical strength.

In a supposedly federal country where some regions relish federal character, catchment area and quota system, there is the need to promote a debate on the sharing of tax proceeds.

As the entire process is enveloped in controversy, the question is: what is the way forward? The answers and options are: further consultations, constructive dialogue, negotiation, concessions, sacrifice, compromise, consensus building, flexibility, acceptance of reality and sustenance of the national interest.

A just tax system is not the one that soothes one section and burdens another but one that ensures that all parties get what they deserve based on what they work for.