The Chairman, House of Representatives’ Committee on Commerce and leader of the South-West Caucus, Mr Olufemi Fakeye, in this interview with LEKE BAIYEWU, explains why the Federal Government should expand the tax net to Nigerians in the lower class
During the second reading of the 2022 Appropriation Bill, you said more Nigerians should pay tax, especially artisans and others in the lower class. Why did you say so, considering the hardship caused by the ailing economy?
What is a budget? It is a programme of how an entity, be that your household or my household, a community or an organisation, but in this case a country, intends to do (perform financially) in a given period, typically a coming period. These are the expenses that I want to do and the things I will like to achieve, but this is also how I intend to raise the money. When what you want to do has been condensed into figures; when you say ‘okay, these are my expenditure profile items,’ the next question will be ‘how do I fund these expenses?’ When you are able to balance those things, then you have a balanced budget. For the past few years in this country, we have been unable to balance the budget unless we borrow and that was the context when I rose up to say we have to find a way to ensure that the social contract is upheld for this country, just as it is done in any other country that I know.
Go back to the time when people like me were growing up. I grew up in the 50s, before the advent of the military into politics. I recall that everybody around me; whether they were farmers, tailors, barbers, they tax. It was a flat rate; it was not something that was based upon what they earned then. But everybody paid tax. Over the past few years, somehow, it has been presumed that ‘no, we don’t pay tax anymore unless we are salary earners or we belong to a certain category of income earners.’ If you are a bank’s managing director or an engineer or a graduate; it turns out that these people that we are focusing on as taxpayers are the ones that are easily brought into the tax net. When I work here, this place where I work becomes my tax collection agency for government; it takes responsibility for drawing my tax and remitting it to the government.
That is why I said in terms of Personal Income Tax in Nigeria, it is not enough because only about five to 10 per cent of tax-paying individuals in Nigeria belong to that salary cadre. What about the 80 to 90 per cent others who are self-employed, doing different things and doing very well? Will they pay anything (to the government)? I will ask you people (journalists) to go and do a little research into that question. By the way, beyond salary earners, who are the other individuals who live in Nigeria that pay tax? So, my contention is that if we are really haemorrhaging every year for the government…for example, the Year 2022 that is in question, the total budget that the government wants to fund is N16.39tn. The expected revenue is N10.13tn. Right there and then, I have a problem because the revenue expectation of N10.1tn happens to be about 61.8 per cent of the total budget they are looking for. The translation for me is that somebody has to bring up the shortfall. How? We are to borrow 38.2 per cent. When you know what this country is going through right now; the better part of our revenue goes for debt servicing from the previous years. We are borrowing domestically and globally in foreign currencies. So, I’m not focusing on just the Federal Government; because when we look at all the debts, they include the debts of even sub-nationals. But somehow in finance, they are classified as sovereign borrowings and everything is on the neck of the Federal Government. All the state borrowings are also going into the books of the Federal Government.
Why do you think taxing everybody is the better alternative?
If the wealth of a nation is embedded in that country, including human capital that we all are, when did we ever write in the constitution that only a category of people that are easy to track should pay tax and the rest of them that we don’t know or find easy to track should be excluded from paying anything? So, there is a presumption – that is why I said it is like hostage-taking. When I spoke on the floor (of the House), they (critics) held me hostage with what I said, including a section of the media. ‘See the man that said people that we all know are poor – taxi drivers, tailors, barbers – should be paying tax. Where is the law that says all those presumed poor should pay (tax)? So, it is a matter of rational thinking.
What about the infrastructural deficits that have made it more difficult to run businesses?
The electricity supply is not reliable in my house, not reliable in (billionaire businessman, Aliko) Dangote’s house. If we all live together in the same place called Nigeria, the presumption in law is that everybody must have to contribute something they can afford into the running of the government.
Lagos and some other states have introduced similar taxes that you are talking about, which have been extended to the lower class. Trade unions and associations also collect levies from traders and artisans. Won’t Nigerians be overtaxed eventually?
I don’t know about all these associations collecting tax. I am not saying that they do not, but I am not aware. I am not delving into that. I am just looking at the global concept of finding a way to ensure that everybody pays something as tax, the way it is in any other country that I know; the way it was when I was growing up here in Nigeria. Now, you talk about Lagos State: I cannot say that I am not a citizen (of Lagos State) because I have property there. But I know that they have developed their taxation system that you cannot run away from paying something. If you don’t have a house, you pay Value Added Tax, and that is the major consumption point for Nigerians. Now, see what Lagos State has become as a result of somebody thinking out of the box much earlier. My understanding is that in a given month, Lagos makes between N42bn and N45bn just from internally generated revenue, apart from or in addition to whatever comes from Abuja (allocation). Why should it be Lagos State alone? Why can’t any other state think? ‘How do I shore up my internally generated revenue?’ That is the question. It is not about the South-West.
Except tax is deducted from the source of income, people naturally do not want to do away with part of their salaries and wages. Did people voluntarily pay tax when you were growing up?
I remember – as a young person, every adult that I knew then paid tax. My mother did not pay because women were exempted when I was growing up. But later on, she had a place where she was selling palm wine and beer. They made her to pay (tax) and she paid. She paid so happily that she even framed the certificate and hung it on a wall in her shop. That is a sense of pride. Are you Nigerians or not? If you are Nigerians, show me your efforts at developing Nigeria. Show me your contributions. Everybody has come to expect the one-direction flow of affection or money from the government down (to the governed). The government is for you and for me. Where is the government getting the money?
How has the government shown affection to Nigeria, especially under the current regime led by the President, Major General Muhammadu Buhari (retd.)?
Between last year and now, there have been many schemes that the Federal Government brought out to help the poor. Let me speak about the one that I know fairly well. By the grace of God and the House and its leadership, I oversee the House Committee on Commerce that supervises or has oversight on the Federal Ministry of Industry, Trade and Investment. This existing government of Buhari that people are maligning and calling names has done more for the poor than anybody that I know in history politically, in terms of injecting funds to help them. The COVID-19 Survival Fund of N75bn was brought out by this government to help Medium and Small-Scale Enterprises. Artisans that you are now defending in the media as being poor are getting N30,000 injection into their personal financing or finances, just to help them to move up. Some of them that were never incorporated, the government is now doing free registration of business name for them. They are not saying ‘go and be incorporated.’ Just have a business name. It is being done for them free of charge.
There are Nigerians who pay taxes but are angry that corruption in the system leads to mismanagement, diversion or embezzlement of government revenue. Is their anger and protest not justified?
I am not an activist and don’t forget what I told you and what we all know. We all live here. When you begin to say, ‘what do we get from the government as a result of paying tax?’ a red light goes on in my brain. It is like asking me to join the placard-carrying crowd against the government. Corruption is still a problem. I am not here to justify what a government is doing or not doing. What I am asking is: do you play your own part? And if you do or don’t, it comes to the question of which one comes first; chicken or egg? Maybe the reason why the government cannot pay or do better is because they do not have enough revenue. I challenge anybody to knock that point off this table. So, which one comes first? Everybody suffers from these indirect taxes that you talked about. What is indirect taxation? I have to install my own borehole; that is indirect taxation. I have to buy my own (power) generator; it is indirect taxation. Diesel is now N325 (per litre). That is indirect taxation. That takes time for you to address. How do you address it? Over time, any government that does not do what you want, vote them out. But this government is doing so well at addressing these issues right now. That is why I said don’t make me an activist. I am only discussing the financing of the budget as far as revenue and the lack is concerned.
If you tell me that they are poor… Who told you they are poor? How did you know? There should be a code that defines who is poor and who is not. It is not liberal; it is not an adlib thing. The government must evolve a policy or plan that says pay upon numbers, not what they do for a living. If people say you have so much income, the government should have a way to determine that income. Right now, the government is not doing enough, except those who earn salaries. That one is easy to determine; it is given to them. But deepen the net to capture those who should pay. Those who we feel should pay, why should they pay? Give us the reasons; give us the parameters.
So, the government should stop borrowing and focus on IGR?
If you are borrowing because you are trying to defend the poor that they said I am trying to harass; if because they are too poor and we will rather borrow in naira and foreign currencies, fine. We are going from day-to-day and year-to-year. But guess what? It is telling on the living standard of everybody because now, debt servicing is taking more money than the government have left to fund capital projects. Again, these so-called poor that you are trying to defend – because I stirred the hornet’s nest – their children and grandchildren will be the ones to repay these loans that the Federal Government is taking.
Is Nigeria an independent country? We just celebrated the 61st (Independence) Anniversary a couple of weeks ago. The question is, how independent are we if we are borrowing? If we are borrowing in naira, it is fair enough. But I lose my sleep when we borrow in foreign currencies also. If you say today, we are going to borrow in dollars at N410 (exchange rate) – that is modulated rate from the Central Bank of Nigeria, the question is when we are going to pay back in three to seven years’ time, what is the naira rate on that date that you want to service that debt down the road?