All over the world, taxation is the means of funding government businesses. The fiscal and monetary policies of any government are essentially the use of taxation in combination with other policies to regulate the economy. But taxation policy of government is not only to raise funds, it is also to grow the economy.
Taxation can also be used as an instrument to redistribute incomes. Taxation is therefore a handy tool for variety of uses.
Taxation is a double edged sword. If correctly used, could boost the economy. Its wrong uses has grave consequences for the government, the people and the business environment.
Kogi State seems not to have got its tax policy right. It is very sad to note that while other states use taxation policy to generate funds and correct imbalances in their economies, Kogi State is using its own tax policy to fast track and catalyze the killings of micro, small and medium scale businesses in its domains.
It is even sadder to note that those who stole government monies to build sudden business empires in the State are not taxed, while the tax authority is running after the ‘Mama Alakara’, ‘Mama alata’, ‘Mama oniyo’, ‘Mama oniru’ and slamming them with outrageous taxes. The effect of this regressive and oppressive tax system is that many of the businesses which are the engine of growth of the State are beginning to close shops. A case of killing the goose that lays the golden eggs.
The problem is that the tax officials don’t want to know whether a business is making profit or losses before giving them unbearable tax burdens. The tax people keep taxing the capitals of these businesses rather than their profits. They capitalised on the fact that these poor people hardly know how to keep any accounting records for the purpose of taxation. Many of them have hardly started a business for a month before they were admitted to taxes. And since they know little about the operating laws of taxes, they yield to defeat. Those who understand the laws head for the Court. Today, there are so many tax cases against Kogi Government in various courts.
Nobody is against taxes. Taxes are legitimate but government must first encourage the buildings of the businesses such that will encourage regular tax payments by the owners. The real problem is that many of these small, small businesses were established from LAPO or some forms of cooperative loans. The businesses die soon after because of regressive tax system of the government that makes payment of these loans impossible.
The most painful aspect is that many of the businesses killed by government tax system are owned by some very old pensioners, who hoped to operate there businesses for survival since their pensions and gratuities were never forthcoming. So while this category of people could not access their pensions, the small businesses they place hope on for survival were forced to close down by heavy taxes. What a vicious circle!
The tax people know where to get real taxes but they will not go there. Drive round the city of Lokoja and other places and you will see huge houses, huge petrol stations, huge hotels, event centres, shopping malls etc. These businesses were being hurriedly put together by emergency billionaires who are stealing our money on regular basis without paying taxes.
Let us look at a typical case of the State regressive tax policy. Recently, the Tax authority has asked all private schools’ operators in Kogi State to start paying about N350k as tax or risk being closed down. I am sure this will mark the end of many private schools in the State. And this is a State where public school system has collapsed completely.
The new tax system on the education sector may collapse an era of good education in the State.
I also know some transporters that relocated from Kogi because of excessive taxes. Many hotels in the State are closing down for the same reason. In effect, many more workers are being laid off because of inappropriate tax policy of the Government. If you go to the stalls of some provision stores, you can count on your finger tips the number of item there. Yet, these businesses are the focus of the tax drive of Government.
The rural areas are also not spared of this regressive tax policy.
Kogi can operate a good tax system without killing the businesses. All they need to do is to pay salaries of workers fully and regularly. These monies become the purchasing power by which the business environments thrive and are able to pay taxes regularly and with ease.
At the moment, the government of Kogi prides itself on increased revenue accruing to the State from IGR. But I bet, this will be short lived. Except Government builds and sustains taxable persons and taxable businesses, it will soon have nothing to tax. Government must provide conducive environment for progressive taxation otherwise the present exploitative tax system can only last for a while. For very soon, there will be nothing left to tax.
– Navy Commodore Folusho Daniel (rtd).
Former Member, Kogi State House of Assembly
