Of all the reforms of the President Tinubu-led administration, which I must say are very brazen, the new tax laws have been the most complex, contentious, and cumbersome of them all. President Tinubu has been very brave, and politically willful enough to take the toughest decisions that ought to have been taken long before now, and the last best time was during the late President Buhari’s administration. Removing the subsidy was the single toughest decision any President in the 4th Republic has had to make. More money is in the hands of the government, but sadly, local governments and local areas do not have this “more money,” and as such, little or no change has been made to the lives they lived with a subsidy in place. The other reform is the removal of dual exchange rates. Now the naira to dollar rates have become uniform barring a little difference in the official and black market rates. The two reforms have saved a lot of money for the Federal Government, especially in terms of foreign exchange flights, which had continually weakened the local currency.
The Achilles heel of the two very vital reforms is the translation of their effects on the street. The first heel is at the feet of our governors where local government autonomy has not been allowed to fly. Mr. President lamented publicly a few days ago and has threatened to deduct local government funds from the source. More funds from the removal of subsidies have not trickled down to the local economies, and so all eyes have remained on the federal government while the state governments go on a jamboree scot-free. The 2nd heel is at the feet of continued fuel importation which sees to the export of a lot of the dollars that were hard earned from our exports. Dangote refinery could save the country from this unnecessary forex flight especially with the naira for crude policy between the NNPC and Dangote refinery. The actual consumption figures for the Nigerian populace are highly inflated as so much is smuggled away. So are the actual production figures of Dangote refinery another controversy, as NMDPRA figures and the refinery’s figures do not tally. If the FG can discourage importation then we will have more foreign exchange to make the naira stronger. The resultant benefits are too numerous to point out. So while the two policies struggle to make an impact in the grassroots and the common man’s economy, there is only so much to be desired. The two Achilles heels, if healed, can have huge implications for our economy, barring the “bottle feeding” of any billionaires in the making through the aforementioned channels. The FG must frown at minting such billionaires at the expense of the general populace.
While we contend with harmonising the positive effects of the two reforms already in place, a new reform in the form of a new tax law is in place, and it has its own effects. The tax bills were voraciously debated, and the debates were exciting and interesting, as they brought to the fore the nation’s ability to converse and reach agreements and understanding over such knotty and complex issues. The tax laws are good. They try to overhaul archaic tax laws and further widen the tax net. Albeit the formulators in some areas were over-reaching, as some aspects of the proposed new laws abrogated other laws without proffering relief in those areas. The debates aggregated a lot of these issues, and new bills were harmonised, formalised, and passed into law after a lot of time and effort. New revelations have it that the formulators of the laws have remained bullish and therefore may have influenced certain issues in the final draft of the law. Hon. Dasuki pointed to this and it seems another look at the final draft was made. We now have a final copy of the law and this should be made as public as possible, especially if the new tax regime hopes to educate the public convincingly. The more we lack knowledge about it, the more troublesome it can become if newer revelations about the tax law form most of the public debate.
I support a new tax law, and I am not against it; however, I have two fears about the new tax law, and I believe Mr. President must be made aware of the reach of the new laws in their entirety. My number one fear is that the tax law may have allocated too much power into their hands, and the penalties stipulated by law may be too crude or harsh. For example, if a company does not declare its taxes/ income, it faces a penalty of say N50,000 a month, and this goes on for every month recurrently. This is so for individuals who also do not declare their incomes or taxes as they will also face fines of say N20,000 a month. The fine will also be charged every month until the individual can pay the tax and the fine. Other fines proliferate the laws which can be quite controversial. The second fear is the transfer of aggression from the rich to the market and, inevitably, the poor. The rich man’s business and lifestyle being taxed will have the option of transferring his aggression to the poor. The irrationality of the Nigerian economy will see to this, just the way fuel prices fall and transport costs continue to soar. So taxes on the big boys will definitely be transferred to the small boys and this will result in the “skyrocketing” of prices. The inflation figures that the federal government has spent two years trying to battle will rise again, unfortunately, and that would be quite retrogressive economically.
I have heard Zacch Adedeji of the NRS say that the reforms will need about 4 years to stabilise.
It sounds reasonable, and if I may offer another reasonable thought, it would be to say that the implementation of the penalties stipulated in the new tax laws should be halted.
This will give the citizenry the time for proper comprehension of the new laws and their implications for business accounts and individual ones. For example, if company A is to pay 5 million as penalties on top of their tax of say 7 million, the penalty should be put on hold, and the company should be charged for the tax, excluding the penalty. They should then be given a 1 year probation to get a full feel of what the new taxes mean. In the subsequent year, the tax and the penalty for that subsequent year alone should be charged, plus the taxes of the preceding year. The truth is that there is so much to be learnt about the new taxes and their implications especially along with the penalties. The public is hugely in the dark, but they won’t be if the tax reforms go full frontal. My overall fear is the overheating of the populace over the effect of the taxes. There are only two classes in the economy right now, the rich and the poor. The middle class is long gone and one too many reforms on the populace within the space of two to three years may be suffocating. These are my genuine fears about the new tax law and I am convinced that the FG should implement it with a lot of circumspection. Late Buhari was about to implement the subsidy removal at the end of 2022 but he was prevailed upon by party stalwarts ahead of the 2023 polls. That was why subsidy payments were provided until June 2023. Your guess is as good as mine as to why it was delayed.
