TINUBU’S TAX REFORMS IS REVENUE GENERATING STRATEGY TO SUSTAIN THE LAVISH LIFESTYLE OF THE SELF-SERVING RULING ELITE
CDWR ADVOCATES PROGRESSIVE TAXATION, MORE TAXES ON BIG BUSINESS PROFITS AND BILLIONAIRES’ LIFESTYLE AND NATIONALISATION AND DEMOCRATIC CONTROL OF COMMANDING HEIGHTS OF ECONOMY
The Campaign for Democratic and Workers Rights (CDWR) strongly hold that the proposed tax reform by the Bola Tinubu government, currently before the National Assembly, is primarily designed to reduce the tax being paid by big businesses while the low-income earners pay more. The working people must reject the tax reform that tends to place a greater burden on them in addition to the prevailing anti-poor policies which have devastated their living standards.
The current disagreement between different sections of the capitalist elite is essentially over who have greater access to taxpayer money for their self-serving interest. It is not about the interest working masses and the poor of their region or ethnic origin. Therefore, we call on leadership of the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) to unite and mobilise the working masses and the poor across the country to reject and resist this anti-poor tax policy
The tax reform consist of four bills:
- Nigeria Tax Bill, 2024;
- Nigeria Tax Administration Bill, 2024
- Nigeria Revenue Service Establishment Bill
- Joint Revenue Board Establishment Bill
These four tax bills will replace 11 tax laws such as Capital Gains Tax Act, Companies Income Tax Act, Petroleum Profits Tax Act, Value Added Tax Act, Deep Offshore and Inland Basin Act, Stamp Duties Act, Personal Income Tax Act, Casino Act, Industrial Development (Income Tax Relief) Act, Venture Capital (Incentives) Act and Income Tax (Authorised Communication) Act.
What has dominated the media discourse is the opposition of the northern ruling elite to the proposed sharing formula of revenue which has increased the ratio based on derivative and reduced the ratio based on population. The northern ruling elite, just like their southern counterpart, do not care a hoot about workers and the poor masses and the development of the country but are interested in the sustenance of their own privileges and primitive wealth accumulation.
According to the current Value Added Tax Act, the proceeds are shared in the following ratio: FG (15%), state governments (50%) and local governments (35%). Out of the VAT revenue that goes to the state governments, 50% is shared to all states equally, 30% is shared based on population while 20% is shared on the basis of derivation. The northern ruling elite is opposed to the sharing formula in the Tax Bill because the ratio percentage based on derivative is now 60%. Section 77 of the Nigeria Tax Administration Bill shares the net revenue as follows: 10% to Federal Government; 55% to the State Governments and 35% to the Local Governments. Unlike the current sharing ratio, the bill states that 60% of the amount allocated to the State and Local Governments will be based on derivative, in other words on the basis of the revenue generated in different states and local governments.
As stated earlier the main agenda of the tax reform is to increase revenue and make the working class pay more through a regressive backward tax system. For instance the Section 146 (c) of the Nigeria Tax Bill has increased the percentage of VAT charged on goods and services from 7.5% to 10% in 2025, 12.5% from 2026 to December 2029 and from January 2030 to 15% irrespective of the social status of VAT payers. In view of the low purchasing power and growing poverty, VAT increment will exacerbate the current cost of living crises, affect production, services and create more joblessness and poverty. This VAT increment is never a subject of controversy or struggle amongst the self-serving ruling elite because they will benefit more from the potential revenue increment. However, while both the northern and southern governors have agreed in principle to an increase in the VAT, they do not want the implementation to commence immediately apparently as a result of fear of backlash from the working masses.
The tax reforms also seek to gradually reduce the revenue accrued to the Tertiary Education Trust Fund (TETFUND) from 2025 to 2030 when it will be eventually scrapped. TETFUND, which at present takes two percent of company profits, provides limited infrastructure and facilities that exist in most tertiary institutions in Nigeria. This two percent of company profits will in the final analysis be transferred to Student Education Loan Fund in 2030. Therefore, a further increment in the already obnoxious fees, beyond the capacity of many students from working class and the poor families, charged by tertiary institutions should be expected. The tax reform is a further proof that Student Education Loan Fund is designed as a justification for the abdication of responsibility to adequately fund public tertiary education by the government. It passes the cost of education funding on students and their parents whose struggle for some years will be towards repaying debts. Again, working people and students must reject the tax reforms together with the student loan policy. Rather, they should demand adequate funding of public education by the government and democratic management of tertiary institutions. We welcome the opposition of the Academic Staff Union (ASUU) to the plan to scrap TETFUND and call for a joint struggle of all education workers unions and students to resist and defeat the plan.
Moreover in the Bills while most workers and poor people are made to pay more taxes juicy tax incentives and exemptions are awarded to some big businesses and billionaires. Section 60 and Second Schedule of the Nigeria Tax Bill exempt big business concentrated at the Export Processing and Free Trade Zone from paying taxes except where such businesses sell over 25% of their produce in the country. Dangote Petrochemical worth about $20 billion is one of such businesses enjoying tax free venture. Similarly, under the current tax regime, big companies (over N100 million annual turnover) pay 30% of profits while medium companies (over N25 million to N100 million turnover) pays 20% profit rate but Section 54 of Nigeria Tax Bill has reduced tax payable by big companies to 27.5% in 2025 and further reduction to 25% in 2026.
Concessions and incentives to big businesses continue in Section 167 of the Nigeria Tax Bill wherein the so-called big business priority sectors including petrochemical and gas companies are awarded Tax Incentives. Aside from tax waivers, exemptions and incentives usually awarded to many big businesses, the capitalists usually use all manners of falsifications to pay little or no tax including using experts to doctor the financial books.
As is the established norm, a chunk of these revenue generated are looted or wasted. For instance, the present national assembly spent over 70 billion Naira in 2023 to purchase luxurious cars for senators and House of Representatives members costing about 160 million Naira per one. This is aside from the tens of billions of Naira mostly stolen or mismanaged in the name of ‘Constituency Allowances and Projects’ by the legislators. This is an example of profligacy and corruption that is replicated across the country from local government to the Presidency, State Houses of Assembly, parastatals, agencies, ministries etc. Through the award of contracts by the executive arm of government at all levels, hundreds of billions of Naira are fraudulently stolen by top government functionaries annually. Through the implementation of neo-liberal policies of privatisation, deregulation, cut in social spending etc., public wealth and resources are stolen from the people by a handful of privileged individuals. Therefore, no matter the amount of revenue that is generated through tax, rent, royalties, levies etc., the people are shortchanged and society remains in backwardness.
Some supporters of the tax including government spokespersons have argued that our tax to GDP ratio is one of the lowest in the world and there is a need to increase revenue for development. Tax to GDP ratio will remain low because big businesses and billionaires do not pay their fair share, most of them pay little or no tax. Increased revenue under the control of a corrupt and wasteful capitalist ruling elite in the past did not translate into meaningful development and will not develop the Nigerian economy in the event that more revenue is generated today and in the future. In the capitalist economy, most of societal wealth and resources is trapped in private control through the ‘ownership’ of means of production and there is little or no development that can be secured particularly in backward economies through this unfair and unequal arrangement. This is why the CDWR supports the call for the commanding heights of the economy to be nationalised and placed under democratic control and management of the working class in order to be utilised to meet the needs of all. However, it should be stressed that to achieve this the working masses need their own mass party to wrest power from the thieving capitalist elite.
Lastly, the CDWR reiterates the call on the leadership of NLC, TUC and pro-masses organisations to sensitise and mobilise workers and community people to vehemently resist these tax bills along with other anti-poor policies.
Rufus Olusesan
National Chairperson
Chinedu Bosah
National Publicity Secretary
CDWR email: [email protected]