More taxes in season of economic recession

Friday, September 2, 2016

At last, the Federal Government admitted what everybody knew, concerning the state of the country's economy: Nigeria is in the depth of recession. The frightening aspect is not just that there is economic decline. The main issue is this: "It's the worst possible time for us," as the Minister for Finance, Kemi Adeosun, declared.

Yes, it is now official that Nigeria, the most populous black nation in the world, a country blessed with natural and human resources, a nation rated, during independence, as one of those that had prospect for greatness, and a country, which had the potentials of rising above its challenges to economic and political prosperity, is in deep economic trouble. Now trade and industrial activities have reduced. The Gross Domestic Product (GDP) growth rate has taken a slide. Unemployment rate has gone above the roof, with millions of Nigerians jobless. Inflation has hit the 17 per cent mark. The cost of living is too high. And the standard of living is in the lowest ebb.

To be sure, the report on the state of the nation's economy, released by the National Bureau of Statistics (NBS), is damning. The report, apart from the above negative indices, also revealed that Nigeria recorded its worst decline in investment inflow, with foreign direct investment, portfolio investment and others rapidly heading south. The way it is, Nigerians, as a people, have to suffer, in the face of increasing hardship.

I must say that the NBS report and the official declaration that the country is in recession is not anything surprising. There have been indications that the country's economy was in bad shape, far beyond the earlier declaration by President Muhammadu Buhari and some government officials that Nigeria was broke. With the price of oil falling steadily, the country not meeting its oil production quota, caused by the activities of militants in the South South and the country still export-dependent, wherein scarce foreign exchange is blown to bring in goods that should, ordinarily, be produced in the country, there is no way the current result would not have sufficed. This is made worse by the fact that there has not been any clear economic policy of the President Buhari administration, through which economic growth or reflation could be achieved. What we have heard, in more than one year, has been fight against corruption, without any concurrent programme to reengineer the economy and increase the productive rate of Nigerians.

Sadly, in the midst of economic recession, the Federal Government could only think of increasing taxes, as one of the ways out. This, to me, is a measure to generate money for the running of government and not, necessarily, to cause a rebound of the economy. For the avoidance of doubt, the Federal Government is proposing imposing telecommunication tax of nine per cent on every Nigerian, irrespective of class or social status. When imposed, for every money spent in "recharging" a telephone, Nigerians pay government tax. Also, the idea of transportation tax, wherein toll gates could return, for motorists to pay at every toll point, has been mooted. There are also indications that the Value Added Tax (CAT), which is five per cent of the value of all purchases, could be increased to 10 per cent. And there are other sundry taxes, like income tax or Pay As You Earn (PAYE) as well as radio & television tax, among others.

When Nigerians pay more taxes, government generates more money. However, the burden is on those who pay taxes, while government, which receives them smile to the banks. When Nigerians pay telecommunication tax, transportation tax, higher VAT, radio & television fee/licence, among other taxes, the burden would be on them. Their income will reduce. Their spending ability will decline. It is, indeed, worse that taxes are being multiplied at a time of economic recession, when the income of individuals are reducing in value, when salaries are not paid, both in the private and public sectors, when school fees are going up and when the prices of essential commodities are rising.

I have wondered why governments find pleasure in increasing the burden and sufferings of the people, in the name of solving economic problems. Now, the country is not getting enough income from oil, due to global drop in prices. The country is not exporting anything and, therefore, will not earn foreign exchange. It is curious, therefore, that government's only proposal to overcome these challenges is to tax the people and make money from them. Government wants to feed on the blood of Nigerians to survive and make ends meet. This, to say the least, is intellectual laziness. It is part of the voodoo economics, which we usually apply in government that does not yield much result. Such measures would never solve the economic problem of the country.

What government needs, at a time like this, is to evolve a sound economic programme, which will have both short term and long term results. Government had said that diversification is the pivot of its economic revival and, therefore, efforts are being made to boost agriculture. This is good. However, it is not only agriculture that would turn around the economic fortunes of the country. It would boost food production, quite all right. But this is not enough to cause economic buoyancy. The pertinent question is: What is the fate of industrialisation in government's economic programme? At present, industries are dying. Jobs are being lost. This trend must be arrested. The government should help industries to bounce back and by so doing, there will be employment. There will also be liquidity, as people earn salaries and spend money.

The Federal Government is in a position to help industries and industrialists bounce back to business, which will, in turn, help the economy. Has anybody thought about giving the industries bailout? This is what the country must consider. When United States President, Barrack Obama, came to power, during the economic meltdown that hit the world, United States companies were comatose. As part of his revival programme, President Obama gave them bailout, called stimulus. He extended loan to the companies, which helped them to come back to business. Today, some of those companies that were having financial crisis have, using Obama's stimulus, bounced back. This is an option that the Buhari government has to consider.

Industrialisation will help the economy more than taxation. While multiple taxation gives government income and impoverishes the people, industrialisation will create jobs and revenue for all stakeholders: Government, employees and employers. To help industries, government should also take measures to address the energy crisis in the country. One way of doing this is to sort out the Niger Delta crisis. Agriculture and industrialisation are important in economic revival. Solid mineral exploitation should not be wished away. And petrochemical is very important. These are the sectors that would pull Nigeria out of recession.

Taking all these together, I am persuaded that government should spare the people more hardship. At a time when salaries, for those who are fortunate to be paid, cannot take any worker home, when those in business are not doing much, and when the economy is generally bad, what the people need is respite. Increased taxation will be too much of a punishment.