Bridging the widening economic gap among Nigerians of low and extremely high income cadre will require government adopting progressive tax systems as both an avenue for adequate income generation and an equitable instrument to ensure taxes are appropriately utilised for the social protection of the poor, Actionaid, a humanitarian rights group, says.
Ekanem Okon, its project manager on Social Investment Programme, at a media forum on ‘Tax Justice in Nigeria,’ said regressive taxes, particularly the Value Added Tax (VAT) and broader range of undefined taxes collected through unorthodox means leave a debilitating impact on economy of the poor, as larger portions of their income were expended on taxes.
The group underscored the need for progressive national tax systems to address cases of over-contribution among the haves-not like smallholder farmers, slum-dwellers, women and other marginalised groups compared with those with huge purchasing power.
The burden of VAT, an indirect tax levied on goods and services, is usually borne by the end-consumer, and since women constitute more of the poor than men, the group raised concern that the consumption tax fell disproportionately on women.
Progressive taxation means higher tax rates for those with higher income or more wealth, such that those who earn or have more are taxed at a higher rate.
According to the group, personal income tax, based on graduated scales where the tax rate rises as income level rises is the clearest instance of progressiveness, which should be effected with exemptions and thresholds on who earns or has enough to pay a particular tax.
“Our main interest is ensuring that we work to achieve social justice for the poor in Nigeria. We see tax justice as one of the areas in which we can have a strong voice towards ensuring that the taxes that we have in Nigeria are progressive and that the revenue that we receive from those taxes are properly used for the poor. We emphasise on progressive tax because there are a number of taxes that are in their very nature regressive,” Okon said.
According to Chinedu Bassey, the programme officer, Civil Society Advocacy Centre, the most prominent of the tax injustices remain abuse of power in tax collection at the state and local government levels, an anomaly he said has encouraged arbitrary introduction of taxes at the expense of payer.
He also highlighted issues around the corporate tax dodging in form of incentives and invasion which is largely under-reported by the requisite authority, helping corporate entities to escape responsibilities with burden passed down on the informal economic sector.
“Tax justice generally is for us to have a just, equitable and just tax administrative system in Nigeria both in the policies and at all tiers of government. There are issues around abuse. Using unorthodox means to collect these taxes and melting out inhumane treatment on tax payers is unacceptable and we are calling out the requisite authorities to make amends to this,” Chinedu said.
