By Alabi Williams / 09 December 2024
The hoopla generated by President Tinubu’s proposed tax reform bills, seems like an orchestration to steer the people away from the real issues. The realities of citizens today are not hinged on immediate tax reforms. Nigerians are already overburdened by crucial tariffs and levies extracted by this government, such that the touted benefits of the proposed reliefs for so-called low-income earners would be remote and of little consequence. In the long run, it is about more revenues for governments to share, plus the controversial tweak in the sharing formula.
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The tax reforms should not be misconstrued or propagated as a welfare package or policy by a benevolent government on behalf of poor people. There’s just a little in it for low wage earners. In fact, wages are already too insufficient to cater to the needs of average families, therefore, foreseeable reliefs would be tokenistic and insignificant.
To make life meaningful for average citizens, one of the reliefs urgently needed is a revisit of President Tinubu’s tax on petrol, also nicknamed subsidy removal. A lot have been said on this, but this government prefers to tax the people for its incompetence. Government blames smugglers for stealing imported petrol for sale in neighbouring countries.
To make neighbouring markets unattractive, the argument was that local pump price should be made prohibitive. In the same breath, government blames high pump prices on importation costs. But now that opportunities for local refining are available, both government and the NNPCL are telling stories. They are yet to decide on what is reasonable in the interest of suffering citizens.
For an economy where more than half of the population are classified to live below acceptable state of want, charging above N1,000 for a litre of petrol is not sustainable. The people may seem helpless and captured today, but their captivity won’t be for long.Whereas the Constitution of the Federal Republic (1999), at Section 16 (1b) endorsed that the national economy shall be structured in such a manner as to secure the maximum welfare, freedom and happiness of every citizen on the basis of social justice and equality of status and opportunity, the reality is that more than half of the population cannot feed well. And high petrol price is at the root of the renewed economic immiseration.
So, if this government must uphold the economic objectives provided in the Constitution, it must stop afflicting the people with IMF and World Bank hardship policies. This twisted policy on tax reforms is needed but not urgent. It needn’t be rushed or done in isolation of more fundamental federal reforms within which tax matters are embedded and must be resolved for equity and social justice to prevail.
That depends on whether the federating regions and units are ready to quit playing politics with the future of Nigeria. After all, taxes were collected between 1960 and 1966; and signs are now pointing that there are more equitable and organic ways to run a federation, not this top-bottom imposition.
Another tax relief sought by the citizens is the application of social justice in managing the power sector, to reduce the pain on consumers. The tariffs charged per kilowatt hour, depending on the Band are way too high for the struggling citizens. Manufacturers have lamented that energy costs are hampering business.
Invariably, they pass the burden on to consumers through higher retail prices. Consumers pay value added tax (VAT) on electricity. Government plans to increase VAT to 15 per cent in the proposed reforms. Consumers pay high prices for pre-paid meters. A single-phase pre-paid meter is sold for N150,000, plus installation charges paid to the contractor hired by the Distribution Companies (DisCOs).
Ikeja Electricity Distribution Company (IKEDC), even had the effrontery to ask consumers to pay to upgrade their outdated’ meters. But when the Federal Competition and Consumer Protection Commission (FCCPC) intervened, and the regulator, NERC also weighed in, IKEDC has backtracked. The November 14, deadline they issued customers has come and gone but curiously, the so-called outdated meters are still working. IKEDC is yet to explain the magic.
All over the country, consumers pay for cables, poles and transformers despite NERC’s feeble pronouncements. The power cabal has captured the power market, because there are no quick alternatives. Where there could be alternatives, tariffs charged by the Federal Government on imports make them too costly.
Whereas China has captured the global solar panel market through assisting manufacturers with subsidies in their home country, the Nigerian government has perfected extorting citizens through unreasonable taxation on imports, including solar panels and tubular batteries from China and India.
Meanwhile, the Nigerian government receives financial grants and incentives from development partners to encourage alternate sources of energy. But there are no incentives for citizens to go solar. The costs are way too high. Let government lower tariffs on solar items (panels and batteries) and the impact would be huge and far more than the marginal reliefs in the proposed tax reforms.
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Meanwhile, former Minister of Finance, Budget and National Planning in the Buhari government, Zainab Ahmed, had told Nigerians on March 12, 2022, that government had quietly exited subsidy payment on electricity.
Zakari Ahmad, who was Special Adviser to Buhari on Energy and Infrastructure, offered a sound logic on electricity subsidy conundrum when he said: “We plan to eliminate subsidy by the end of the year (2022). People will say if you eliminate subsidies, you will have poor people pay more. But our argument is that the only reason the power prices in Nigeria are high is because we do not generate enough. If you generate 10 GW of power, tariff will be half of what it costs. So, keeping the prices very low is not the approach, but delivering adequate power.”
But the reigning Power Minister, Adebayo Adelabu, keeps talking endless subsidies, even after he created a premium Band A customer that now pay cost-reflective non-subsidy tariff. Now, he claims the Federal Government has returned Band A customers to the class of those that benefit from subsidy payment, alleging that government pays N22.29-kilowatt hour (KWh) to support them.
The real fraud in the billing system is that government and the regulator, NERC, are unable to keep pace with their own projections. In April 2024, they effected a 300 per cent increase in electricity tariff, with the promise that only affect 15 per cent, supposedly rich consumers who were forcefully migrated to Band A, were the only segment affected. Now, the power sector cabals have stylishly migrated more consumers from the so-called subsidy Bands B to E to the premium Band A, without adequate supply to justify the premium tariff.
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Last week, the Senate declared that the power privatisation done 11 years ago is a total failure, promising to propose measures to repeal the exercise. Pray the lawmakers have the balls to carry out the threat. We’re used to their huff and puff.
More than the relief in the tax reforms, Nigerians need affordable and available electricity to do business and live comfortably.
Port charges are too high and the burden is transferred to end users of imported products. In August, President Tinubu signed an executive order to remove tariffs, excise duties and value-added tax on imported pharmaceuticals and for a category of grains. The waivers have been interpreted differently by people in Customs to suit their targets, and retail prices for essential medicines and grains have not come down. Same for users of diesel and cooking gas, who were promised “ground breaking” VAT waivers in October. No dice.
It could be argued that the aggravated poverty, hunger, anger and frustration under Tinubu’s less than two years rule did not prepare people outside government with the requisite physical and mental energy to read, comprehend and process four huge volumes of the tax bills (of about 270 pages), unleashed all at once, as if the world is coming to an end.
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This government lacks the emotional quotient to gauge citizen’s feelings and learn to take one step at a time; instead, it is rash and brazen because Nigerians are largely easy going. Can’t we do one tax reform in 2024, and maybe two in 2025, in a staggered format?
In addition to being rash, the government is too conceited, refusing to surrender the process to scrutiny and engagement. Even after governors of the 36 states, who are the major beneficiaries of the tax reforms counseled that the bills be set aside for more engagement, the Federal Government damned them, asking those who needed engagement to join the public sitting that did not take place before the Senate rushed to pass the bills. What impudence!
The anger from the North is a response to other matters besides tax reforms. From the responses, it is clear many have not read the bills. However, this government in its remorseless self-centeredness had created an atmosphere for it not to be trusted.
With key revenue outfits, the Finance ministry and the Central Bank of Nigeria (CBN), and other strategic economic agencies put under core loyalists of the President, there was a legitimate scare in the North and elsewhere that the reforms were another device by the administration to further privatise the economy.
The President’s tax reform adventure at the time he was governor of Lagos State did not help matters. He is alleged to have a sumptuous stake in fees charged the Lagos State government by a tax consultant.
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The jabbering and indecorous Senate didn’t help matters. Let this Senate not plunge this country into disaster, all because the principal officers feel recklessly indebted to the Presidency. Nigeria is bigger than any Presidency. They must be guided.
Note: This article was first published by The Guardian Newspaper.
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