More hardship for Nigerians over govt. aggressive revenue drive

By AYOOLA OLAOLUWA

Nigerians, especially the unemployed and low-income earners are groaning over incessant taxation by the Federal Government. Faced with dwindling revenue and unable to fund its numerous projects, the Federal Government had in recent years introduced new taxes, including the newly introduced minimum 1 kobo per second tax on every phone call made in the country.

According to the government, the funds realised will be used to finance free healthcare for the Vulnerable Group in Nigeria (VGN). The President, Muhammadu Buhari (retd.), had last week signed the National Health Insurance Authority Bill 2021 into law.

The act includes a provision under Section 26 subsection 1C which states that the source of money for the Vulnerable Group Fund includes telecommunications tax, not less than one kobo per second of GSM calls.

Based on BusinessHallmark’s analysis, Nigerians will now pay about 20 kobo on every calls made, up from about 11kobo per second it used to be. The new tax translates to a 9 per cent tax on GSM calls. The study also indicates that N5.61 will now be charged for every SMS sent from June 1, instead of the current rate of N4. This translates to an increase of N1.61 on every SMS sent.

Before the Federal Government’s announcement of the new tax, GSM operators under the aegis of the Association of Licensed Telecommunication Operators of Nigeria, had proposed a 40 per cent increase in the cost of calls, SMS, and data as a result of the rising cost of operating in the nation.

When the proposal is eventually implemented, Nigerians will be paying a minimum of 49 percent tax on all data, calls and SMS they initiated on the phones. The new levy is coming barely five months after the Federal Government slammed a N10 tax on every litre of all non-alcoholic, carbonated and sweetened beverages drinks produced in the country.

According to the Minister of Finance, Budget and National Planning, Zainab Ahmed, who announced the new levy in January, the revenue generated would be used for health-related and other critical expenditures in line with the 2022 budget priorities. The new tax on carbonated drinks was opposed by the organised labour which called it nothing, but a declaration of war on Nigerian.

The organised labour, in a statement signed by the President of Nigeria Labour Congress (NLC), Ayuba Wabba, expressed fear that the imposition of the levy might degenerate into a breakdown in industrial relations in the bottling sector and in the country as a whole.

“We are concerned that the re-introduction of excise duties on non-alcoholic, carbonated and sugary drinks will impose immense hardship on ordinary Nigerians who easily keep hunger at bay with a bottle of soft drink and maybe a loaf of bread.

“Our concern is the mass hunger that would result from the slightest increase in the retail price of soft drinks owing to imposition of excise duties as it would be priced beyond the reach of many Nigerians”, Wabba had warned.
However, despite the stiff opposition against the levy by the organised labour, the government went ahead to implement it, further putting pressure on the finances of many Nigerians.

For instance, BH checks revealed that the cost of a 50cl bottle of popular soft drinks like Fanta, Coca Cola, Sprite, Pepsi Cola and Mirinda which sold for N150 between January and March 2022, now goes for between N200 and N250.

On Friday, May 27, a 50cl bottle of Coca Cola was sold to our correspondent at the popular Berger Bus Stop at the rate of N200.
“Are you not in Nigeria? Didn’t you hear that the government has imposed a huge tax on mineral? We now buy a pack of already refrigerated drink at the rate of N2,000, instead of the N1,500 we used to buy it. This explains the reason behind the increment”, the hawker fired back when asked why the steep increase in price.

Findings revealed that owing to the rise in the prices of soft drinks, many Nigerians have abandoned the commodity. Bothered by the sharp drop in sales and revenue, bottling companies, findings revealed, have been forced to repackage the drinks into smaller bottles. For instance, the smaller 35cl bottle is now more in the market and it goes for N100.

A staff of the Nigerian Bottling Company (NBC) who spoke with our correspondent on the condition of anonymity, said the decision to reduce content and price was more of a survival strategy.

“A large bulk of our products taken out by salespersons are often returned as unsold. Also, distributors are no longer booking large quantities as before.

“So, the management made a decision to reduce the bottle, content and price to N100 in order to drive sales. And since that decision was taken, we had seen a major improvement in sales”, the staff noted.

Our correspondent observed that other bottling companies have adopted the same tactics in other to regain lost market.

Speaking on the development, the Chief Operating Officer of the Association Telecommunication Companies in Nigeria (ATCON), Ajibola Olude, said the imposition of 5 percent tax on the industry constituted an additional burden on operators who are already grappling with multiple taxation.

“The behaviour of the government is not helping things for anyone. As at today, we have about 36 levies and taxes against operators.
“An additional 5 percent excise tax has now been considered effective for the first of June. All of these affect the sector, and that’s why we want the regulators to see that this is where we are”, Adebayo stated.

President Buhari had on January 13, 2020, signed into law the Finance Bill 2019. The new Act amended 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 their revenue generation potential for the country.
From February 2020, the government began giving impetus to its non-oil revenue generation drive by introducing several measures, including the implementation of the revised Value Added Tax at 7.5 percent, increase in import duties paid on imported equipments, as well as new tariffs on electricity consumption, removal of fuel and electricity subsidies, among many others.

Since the implementation of the Act began, the monthly inflation index had gone up. It had 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 survey conducted by BH indicate that prices of several goods have gone up as the new levies imposed by government became effective.

For example, the collection of stamp duties on every financial transactions 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 daily, depending on the volume of transactions they made.

A leading financial institution, Access Bank, had in the thick of Covid19 lockdown in 2020 reversed the deductions made on stamp duties for the months of March and April after a big uproar. The bank, while apologising to its customers, promised to reverse the deductions and bear the cost for the two months.
It then informed customers that proper deductions will start from May 2020.

While Nigerians were still grappling with the hardship brought about by the implementation of the stamp duty regime, the government added Certificate of Occupancy, insurance policies, Guarantors form, memorandum of understanding and tenancy agreements to the taxable lists.

With this new policy, all documents pertaining to rent or lease agreements for homes or offices, C of O, as well as other business-related instruments are subjected to authentication with the new FIRS Adhesive Stamp duty.

“The following are the chargeable transactions in the Fixed Duty Instruments category, Power of Attorney (PoA); Certificate of Occupancy (C of O), Proxy form; Appointment of Receiver, Memorandum of Understanding (MoU), Joint Venture Agreements (JVA), Guarantor’s form, and Ordinary Agreements Receipts.

“While ad-Valorem Instruments chargeable under the Stamp Duties Act are Deed of Assignment, Sales Agreement, Legal Mortgage or Debentures, Tenancy or Lease Agreement, Insurance Policies, Contract Agreements, Vending Agreement, Promissory Notes, Charter-Party and Contract Notes”, the service had explained.

Another levy that has pushed up the prices of goods is the review of VAT rate on all consumed goods to 7.5percent from 5%. Many traders who did not know what VAT meant also joined the bandwagon by increasing the prices of food items. Also, telecoms subscribers experienced a spike in the payments for calls and data services.

The VAT increase presently reflects on all phone calls, text messages and data for 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 transaction 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 was an increase of 0.12 percent for both the Buy and Sell side after the 2.5 percent.

Electricity consumers were also not left out. For instance, the government increased the duty payable on imported pre-paid meters from 10% to 45%. Still grappling with challenges brought about by the hike in tariff rates and levies, Nigerians in 2021 woke up to the announcement that the government had raised Passenger Service Charge for air travellers.
With the development, air passengers now pay a new PSC of N1000, up from N2000 for domestic flight operations and $1,000, instead of the old rate of $50 for international passengers.

The new rate led to further increase in air fare by airlines on both routes, making air travel more expensive in the country at a time many Nigerians find it difficult to travel by road owing to insecurity.

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.

The experts warned that the government should prepare for social upheaval as cost of real investments will go up and more people enter into poverty. 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), who recalled the various policy measures undertaken by successive administrations to raise revenue through taxation, lamented that the biggest chunk of tax revenue was being used to finance the wealthy 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. It is people that don’t pay taxes that are enjoying the benefits through contract awards and patronages in one form or the other”, Dike maintained