Cross River: Tax amnesty for low income earners and implications

• Policy Yet To Take Off Three Months After
The Cross River State government has abolished all forms of taxation and levies paid by low-income earners in the state. This category of people includes, cab and okada operators, petty traders and hoteliers, among others, whose earnings are below N50, 000 monthly.

Explaining the rationale behind the tax exemption, Governor Ben Ayade said: “Let me state very clearly that in Cross River State today, we have put an end to any taxi driver, cyclist or okada rider being made to pay any form of tax. This is so because we want them to have disposable income that can keep the economy spinning. That is one fast-track way other than putting a pay cheque on their tables. We can create opportunities, where government’s burden is taken off them permanently. In the same vein, I don’t want to see a hotel that is struggling to survive with challenges of diesels being chased after by government officials for taxes.

“I have seen poverty in my personal life and I know what that small N2, 000 means to them. I have warned anybody who is still collecting money from these people to desist forthwith.”

On how the state will cope with the shortfall, which is put at about 10 percent of all collectable taxes, considering its lean finances and the impact it will have on the Internally Generated Revenue (IGR), Ayade said: “It is clear to emphasise here that at this point, no nation, no state and no administrative authority can tax her people to prosperity…God has given us an elevated platform of authority to use our intellects and support them and not to suppress them.

“Why would government put a burden on people earning less than a N1, 000 a day with wife and children, shopping in the same market with the rich, who earn over N300, 000 monthly? I would rather tax my intellect to prosperity than taxing my people because we have sufficient education, exposure and experience, which we need to bring to bear for the prosperity of our people, which is why they elected us.”

Expectedly, when Ayade made this pronouncement, beneficiaries of the tax exemption were excited. However, their joy has been replaced with worry and uncertainty, as the state government is yet to enforce the policy. Tax and levy collectors have not stopped coming to demand for tax.

Mrs. Atim Umoh, a dealer in plastic items at Watt Market, said: “I have been paying tax. The first time I paid, it was N25, 000 a year. After that, I have been paying N15, 000 as income tax. Outside this, I have also been paying sanitation, signpost, business premises and business name to the local government and different groups that Come for tax. Some of these officials are fake, while some of them are real.

“My sales income in a year after all deductions is not up to N100, 000. I spend a lot on petrol, pay my staff and buy recharge cards, among other expenses.”

When asked about her feelings over Ayade’s pronouncement, she replied, “I am not moved one bit by that tax exemption. This is not the first time he would be making such promises. Can you imagine that they have already brought demand notice for this year? The whole exemption thing is a sham, because the government is not serious about it. Rather, it likes playing to the gallery. Why haven’t they worked out the modalities?”

Commenting on the tax issue, a chartered accountant and tax consultant, Gershom Davies, explained that taxation is a very good source of revenue generation in Nigeria, especially for states in the face of current dwindling oil fortunes.

“But the problem is that tax in Nigeria is not well administered, with regards to the different cadre of tax payers. It is an area I believe is deep in corruption and inefficiency. And because of all these, we don’t have the best returns that could have come to us from tax.

“Secondly, I have observed that each time the Legislature makes a law on tax, it is not suitable for our society. It seems our lawmakers or whoever is guiding them just picks something in Britain and then tries to replicate it here without considering the local situation. So, enforcement becomes difficult.

“Thirdly, the administration has a problem in that it is very difficult controlling or stopping officials from doing anything that is not profitable to individuals. That is why you see them struggling all over the country now, trying to either ban the use of external experts consultants or totally render them ineffective. But aside all this, with good policies and enforcement in place and an effective use of the media to educate the masses on why tax should be paid, it could bring in good returns. But if this were not done, it would be difficult.

“As consultants to Cross River State on tax matters, what we noticed first was inefficient management and we tried to stop it. But along the line, we were no longer handling this. What I see generally in Cross River is poor tax administration.

“Although I have heard that announcement, but I am not a lawyer and so cannot address the issue of execution or if it is mere political talk. I heard the governor has exempted all people earning below N50, 000 a month from paying tax, but I have been seeing some gentlemen in uniform accosting taxi drivers and still molesting people generally for tax. I think it is more of a political talk.

“Personally, I can see it working legally. You can’t just wake up one day and say people should not pay any kind of tax. There are many ways a government can do that, if it truly feels strongly about it.

“For instance, it can lower its enforcement on those levels of people but to just say people should stop paying tax is not done. I wonder if they have the right to do that.”

On what the state may lose in terms of revenue regeneration, if enforced, he said: “When we were working as consultants, we discovered that the affluent or corporate tax payers contributed more. So, we did not pay much attention to them, when we were consulting for the state, because you discover they may bring only 10 percent into the basket. So, you don’t make life too difficult for them in this situation, but at least you let them bring in a token, so that they will understand that it is a responsibility to pay tax, no matter how small.

“With regards to the economy, it may not do much harm to the state, except that you are likely to find a lot of people who would have paid ordinarily, will start to re-classify themselves into this group. The state may not feel the effect now, because fortunately, lots of things are happening despite the down turn in oil. We have a situation where suddenly over deduction of Paris club money is coming to states.

“We have been talking about several tax policies, as well as holding conferences in the past. Now, we need to sit down and look at tax as a profession, bring out the policies, look at the legislation, the implementation and bring out the proper frame work and go about it in a professional manner, but if we keep going the way we are going, I don’t see anything coming out of it.”