The Governor’s Mistake [Video]

A governor waives most small business taxes in his state, and attacks the core principle of taxation, Nigerians rejoice – he is fighting for the masses. Yes, why should we pay taxes when there is no government in our lives? Every respectable company in Nigeria runs a local government operation, providing its water via borehole, electricity via generator and security via private security guards. Government is invisible! We know those things – Nigeria is not working. Yet, what will make Nigeria work is not killing taxation but by demonstrating that taxes can work for the people, and then using that construct to stimulate them to pay more. Until Nigeria can get people to understand that taxation is part of being a citizen, we have no future.

Yes, many  have shared the clip of the Governor of Cross River state, Ben Ayade, who waived most taxes in his state. While his post Covid-19 tax waivers are commendable, his broad statement should not be celebrated blindly. He attacked the tax system, making a case that governors should not make. For Nigeria to rise, governors have to find ways to deepen their tax bases, and then use the resources judiciously. Like I noted in the Platform, people willingly pay taxes when taxes are working in their lives! But that does not mean we have to give them excuses not to pay. Why? The promises of all politicians are taxes of the citizens. When that tax is not available, nations fade.

I respect His Excellency but his argument is flawed. Tax should not be based on scale of business but profit, as contained in the Nigerian tax ordinances. People should pay taxes as that builds a system we all depend on – affordable public schools, at least. If you are in any government university or polytechnic and paying less than N300,000, thank tax payers for that possibility when private schools continue to hit new heights on fees and tuition. 

You tax a man that makes N30,000 as a teacher while the man who owns 20 goats selling two every market day does not pay tax. Mr. Governor, in his thesis, where farmers should not be taxed will be comfortable with that. The construct  is that only those that have formal employment should pay taxes in Nigeria even though some of them are still very poor! Yes, the farmers, carpenters, cab drivers, etc are not paying, but that does not mean that is normal. We have to work hard to change that even if they have to pay N50 in a year provided that was based on their profits. Government does not need to have directly helped in your farming before it can have the rights to tax the profits from your farming.

Governor is a politician but his state will not advance on this muddling tax policy. He can suspend tax payment during a pandemic. That is fair, but making collection of tax to be seen as an evil system is recklessness.

 What Mr Governor needs is a tax collection system which follows the law: find an efficient way to tax profit whether from a big or small company. Linda Ikeji blog was rumored to be making hundreds of millions of naira  at a time. She probably had less than three staff. Many said no tax was paid. But if you check her revenue, she could have made more money than most insurance companies in Nigeria – most report less than one billion naira in revenue, yearly. Yet, they are hit with tax while those small profitable entities pay nothing.

This is my formula – prepare the minds of people that paying tax is part of being a citizen. Do not attack the tax system. Sure, you can suspend or waive during a pandemic but taxation is not evil. For more than twenty years, Nigeria has been working hard to re-orient the citizens on the necessity of paying taxes. We cannot make heroes out of those who now think asking people to pay taxes is a bad policy.

Yes, a governor should not send a different message. I will hope our leaders make that point because Nigeria’s problems of tomorrow will be anchored on our ability to pay taxes. More so, a state governor has limited control of taxation in Nigeria. The statement from the governor could make the work of federal tax collectors harder, as the citizens will see all of them as agents of the state, which the governor had mandated not to collect taxes. Practically, a governor cannot dictate most things on taxation in Nigeria. The man who sells acres of land and pays no VAT, and the man who sells dozens of cows and pays no VAT should not be given tools for excuses.

I commend Mr. Governor for waiving taxes during this hard time. We need the small businesses to thrive, for tomorrow. But taxation is not bad and no governor should preach that message. Our challenge is this: tax collection remains sub-optimal and governors like Ben Ayade should improve that system in Nigeria.

I COMMEND the tax waiver.

Register for Tekedia Mini-MBA (Feb 10 - May 3, 2025), and join Prof Ndubuisi Ekekwe and our global faculty; click here.