Headlines
Labour unrest looms over new taxes and levies
…labour, Activists reject increases
By AYOOLA OLAOLUWA
There is mounting tension and apprehension in the country as organised labour is mobilising members for a showdown with the government over the introduction of multiple taxes and levies it described as burdening and anti-people.
It would be recalled that the Federal Government had embarked on an aggressive revenue generation drive in a desperate bid to fund ballooning expenditures. In order to give legal backing to the revenue drive, President Muhammadu Buhari had on January 13, 2020, signed into law the Finance Bill 2019.
The new Act amended seven extant fiscal laws, namely the Customs and Excise Tariff Tax Act, the Petroleum Profit Tax Act, the Company Income Tax Act (CITA), the Personal Income Tax Act (PITA), the Value Added Tax (VAT) Act, the Stamp Duty Act and the Capital Gains Tax (CGT) Act in order to enhance its revenue generation potential for the country.
And from February 2020, the Federal Government began giving impetus to its non-oil revenue-generation drive spelled out in the new Act, by introducing several measures, including the implementation of the revised Value Added Tax (VAT) at 7.5 percent, cancellation of tax holidays and import waivers are previously given to critical sectors like the power and health sectors, increase in import duties paid on imported equipment, the introduction of stamp duties on several services, like the 6% duty on every tenancy/lease agreement, as well as tariff increase on electricity consumption, removal of fuel and electricity subsidies, among many other levies.
According to Business Hallmark findings, while the aggressive revenue drive will help the government reduce debts and budget deficits, as well as fund social services, the monthly inflation index has gone up owing to an increase in prices of consumer goods. This development, it was gathered, has also contributed to the decline in the nation’s GDP growth rate as Nigerians continue to lower their consumption rate in the face of shrinking disposable income.
A one-week survey conducted by BH indicates that prices of several goods have gone up, while others will soon rise as the new price regime introduced by the government becomes effective.
For example, the collection of stamp duties on every financial transaction has impacted negatively on many individuals and businesses. According to the policy, a stamp duty of N50 is paid on every transaction of N10,000 and above. While the amount seems small, several firms and individuals have complained that they were deducted between N3,000 and N25,000 daily, depending on the volume of business they do.
The owner of a popular supermarket in Ijaiye-Ojokoro who did not want her identity disclosed for personal reasons said that she records more than three thousand sales a day, with over 70 percent of the sales above the N10,000 mark.
“That means I am charged N50 each for around 2,000 sales that passed through my bank account daily. Since we cannot continue to bear the cost what we know do is to pass the it to any customer that purchase items of N10,000 and above”, she said.
More businesses are adopting the same approach by passing the cost to consumers. Many banks, it was gathered, have started implementing the deduction of stamp duty charges for onward remittance to the Federal Inland Revenue Service (FIRS).
While Nigerians are still grappling with the hardship brought about by the implementation of the stamp duty regime, the government decided to widen the net by adding Certificate of Occupancy (C of O), insurance policies, Guarantors form, memorandum of understanding and tenancy agreements to the taxable lists.
Another levy that has pushed up the prices of goods is the newly introduced VAT rate of 7.5percent on all consumed goods. A survey conducted by our Correspondent revealed that many firms and traders have increased the prices of their products in obedience to the new rate.
On June 1, 2020, Multichoice Nigeria, owner of DStv and GOtv increased new prices to accommodate the implementation of the new VAT rate of 7.5% from 5%. With the new levy, Premium subscribers on DStv now pay N16,200 against N15,800. This is an addition of N400. Compact Plus subscribers now pay N10,925 against N10,650.
Similarly, the Compact bouquet price has been adjusted from N6,800 to N6,975. Subscribers on Confam bouquet now pay N4,615 against N4,500 while Yanga subscribers pay N2,565 against N2,500. On the other hand, subscribers on Max on GOtv now pay N3,280 from N3,200 while Jolli and Jinja subscribers now pay N2,460 and N1,640 from N1900 and N1200 respectively.
MultiChoice explained that the increase in fees was in line with the legislation of the Federal Government which increased VAT in January 2020, with implementation effective 1 February 2020.
“In order to provide some relief for customers, MultiChoice Nigeria has absorbed the cost of an increase in VAT for the past four months, keeping its products and services at the old 5% VAT, however this is no longer possible and the mandated 7.5% VAT will be applied accordingly,” the company stated.
While corporate firms have all began implementing the new VAT rate, checks revealed that many traders who did not know what VAT meant have increased the prices of food items. A visit to some of the markets showed that there was an increase in the prices of many products as traders claimed some companies now hide under the guise of VAT to increase prices of some items.
At the Agege market, Lagos, consumable goods and household items like sugar, margarine, soaps, detergents, provisions, among others, recorded about 20 per cent increase in price.Also, telecoms subscribers have started paying more for calls and data services. Findings revealed that the VAT increases now reflects on the charges of phone calls, text messages, and data for the internet.
Also affected is the stock market as investors and operators now pay more as transaction cost for shares traded on the Nigerian Stock Exchange. From February 1, 2020, the cost of transactions in the stock market increased as follows: Sell-side- Stockbrokers fee 1.46 percent from 1.42 percent; NSE fee 0.33 percent from 0.32 percent; Central Securities Clearing System, CSCS and Trade Alert fee 0.39 percent from 0.38 percent.
On the Buy side: Securities and Exchange Commission (SEC) fee 0.33 percent from 0.32 percent; CSCS Trade Alert and VAT Alert fee 0.07 percent from 0.06 percent and Brokerage fee 1.46 percent from N1.42 percent. Overall, there is an increase of 0.12 percent for both the Buy and Sell-side after the 2.5 percent
Electricity consumers have also started paying more as the costs of generating, transmitting, and distributing electricity has gone up in recent times owing to several factors, leaving electricity producers with no other option than to pass it along to hapless Nigerians.
For example, the Federal Government through the Nigerian Customs Service (NCS) increased the duty payable on imported pre-paid meters from 10% to 45%.
Due to the upward review of import duties previously paid on electricity meters by the government, the price of a single-phase meter is now N44,896.17, from the initial N36,991.50, while customers applying for a three-phase meter will be paying N82,855 instead of the previous rate of N67,055.
The last-minute intervention of the National Assembly gave Nigerian temporary relief from the proposed electricity tariff hike which would have started on July 1. Still grappling with challenges brought about by the hike in tariff rates and levies, the government increased Passenger Service Charge for air travelers.
With this development, air travel now cost more with the new Passenger Service Charge (PSC) increment from N1000 to N2000 for domestic flight operations and from $50 to $100 for international passengers.
For example, a one-way trip to Abuja on economy class costs between M29,000 and N40,000, depending on the airline. The situation has made air travel more difficult in the country at a time many people are finding it tough to travel by air.
Apart from these levies, the government is also mulling the idea of reintroducing toll gates on federal and states road as well as removing fuel subsidies, among several belt-tightening measures, forcing experts to voice concerns of imminent destabilization of the fragile socio-economic system.
Labour, activists plan showdown
Worried by the effects of the incessant introduction of new taxes and levies by the government, the Nigeria Labour Congress (NLC), at the weekend rejected the levies and taxes, calling on the government to rescind them to avoid confrontation with organised labour and the Nigerian masses.
Labour in a statement by its President, Ayuba Wabba, called on the government to rescind the policy to avoid confrontation with organised labour and Nigerian masses.
“We read with dismay the new policy by the Federal Government through the Federal Inland Revenue Service, FIRS, stipulating a 6 per cent stamp duty fee for every tenancy and lease agreement in Nigeria. This new financial burden on poor Nigerians comes at a time when the socio-economic pressure arising from COVID-19 dislocations is pushing many Nigerians beyond the limits.
“The NLC rejects this new stamp duty policy on rents and leases as it would worsen the deplorable situation faced by Nigerian workers most of whom, unfortunately, are tenants. It is also alarming that we are having a rash of hike in taxes and user access fees when other countries are offering palliatives to their citizens.
“We call on the Federal Government and the Federal Inland Revenue Service to rescind this harsh fiscal measure as it is boldly insensitive to the material condition of Nigerians which has been compounded by the Covid-19 health insurgency.
“Nobody would want to be a tenant if they had an alternative. This means that tenants in which these new policy targets are some of the most vulnerable people in our society.
“Accommodation is a fundamental right guaranteed by Nigeria’s constitution. It is unimaginable that tenants who are in the most vulnerable group would be expected to pay 6 per cent tax for accommodation when sales tax is 1.5 per cent. This is indeed a great injustice against the Nigerian poor. The government must take deliberate steps to avoid institutionalizing the widespread belief that it is a crime to be poor in Nigeria.
“While we expect the reversal of the 6 per cent tenancy and lease stamp duty policy, we remind the government that its highest responsibility is to ensure the security and welfare of every Nigerian. It is a social contract. It is a sacred duty!”, the statement read.
Likewise, the Union Labour Congress of Nigeria (ULC) rejected the imposition of new levies and taxes on Nigerians by the government, describing it as anti-people and anti-development.
Speaking in a statement by its President, Mr. Joe Ajaero, the body argued that manufacturers and businesses in an attempt to recoup the extra cost as a result of the hike in VAT and others would dump it on the consumers and this would snowball into another round of increase in prices triggering another inflationary round that would ultimately undermine the economy.
“We are indeed worried that governance in Nigeria has rather become a tool for impoverishing the people rather than to make the lives and living of the populace more beneficial. We do not think that the government realizes the depth of misery that pervades our nation and may have completely detached itself from the people it ought to succour.
“Definitely, prices of goods and services will go up as a consequence with its attendant implications for the cost of living pushing down a further greater number of Nigerians into the cesspool of poverty. ULC is worried that a government that has put all manners of challenges on the path to paying the new minimum wage of N30,000 to Nigerian workers would find it so easy to foist further hardship on the same workers and peoples.
“Is it not possible that the government may just be putting the cart before the horse? You sow then you reap! It is not the other way round. If that is the case, we believe it will be counter-productive”, Ajaero stated.
BH reliably gathered that the two unions having reunited have started mobilising its members for a possible showdown with the Federal Government.
“We have reached out to the government and we expect them to rescind the taxes or call us for negotiations. In the absence of that, our members are ready for a showdown with the government. What they have given us through one hand (minimum wage), they are taking away with another hand”, a top labor told our correspondent.
Meanwhile, financial experts who spoke to BH warned that the government should prepare for social upheaval as the cost of real investments will go up and more people enter into poverty. In its warning to the government, the International Monetary Fund (IMF) cautioned against implementing new tax measures in order to increase revenue.
The IMF said now is not the time for countries to increase their tax push, but rather, initiate supportive policies that will help affected households and sectors impacted by the economic downturn caused by the COVID-19 pandemic.
The Director of the IMF Africa Department, Abebe Aemro Selassie, while giving this advice, said policies needed now are those that will confront the financial burden of businesses, as most have recorded a significant loss to COVID-19 pandemic and the measures adopted to curb further spread of the coronavirus.
“Nigeria is an oil-exporting country so the impact of the pandemic is being compounded by the sharp decline in oil prices. We are projecting that GDP growth would contract around 5.4 percent this year so it’s a very significant hit to incomes. It will be very important to have very nimble policy response to ensure that the hits to the economy are not compounded by policy challenges.
“This is not the time to be aggressively introducing new tax measures but there is a long-standing challenge, on the fiscal side, of needing to have sufficient resources generated by the government from non-oil sources to provide investments in health, education, infrastructure so there is that long-term agenda that needs to be addressed. Right now, fiscal policy can be supportive and needs to be supportive”, Selassie argued.
Also, a human rights lawyer, Prof. Chidi Odinkalu, also faulted the federal government for raising charges on a variety of services while ordering private operators not to do the same.
In a tweet read by BH,, the former chairman of the National Human Rights Commission (NHRC) said that it is wrong for the federal government to direct business operators not to increase prices of goods and services despite an increase in value-added tax (VAT).
“Increased VAT, increased electricity tariff, increased petrol price, charges on POS, charges on ATM withdrawals, but private operators can’t adjust their prices under the watch of a government that keeps raising charges,” the tweet read.
Speaking on the fiscal steps by the government and implications for revenue growth, a tax consultant and seasoned tax administrator, Mr. Mark Dike, noted that tax administration could be likened to chicken and egg relationship.
“It is sad that over the years, millions of ordinary taxpayers have not been enjoying the benefits of tax compliance while the so-called wealthy Nigerians avoid taxes and yet enjoy all the benefits associated with tax payment”.
Dike, a former President of the Chartered Institute of Taxation (CITN), lamented that with just a little over 200 billionaires paying taxes while several thousand others defaults, the preponderance of generated revenue from taxes was being used to finance the wealthy in the society without taking care of the basic needs of the citizenry.
“There is no gainsaying the fact that taxes, especially non-oil taxes, are key to Nigeria’s sustainable development. It is like the chicken and egg story. Without taxes, there can be no development. But the problem we have is, those who pay taxes don’t enjoy the benefits here. What you have is a situation where the wealthy, or what I call ‘flight by night wealthy people” that don’t pay taxes are the ones enjoying the benefits through contract awards and patronages in one form or the other that are not adding value to the economy”, Dike maintained.
