2015 budget…Rich Nigerians to pay more for luxurious lifestyle

At last, the Federal Government (FG) has signaled the implementation of the austerity measures it announced in the wake of the fall in price of crude oil in the international market. 

While announcing the drop in oil price then, Minister of Finance and Co-ordinating Minister of the Economy, Mrs. Ngozi Okonjo-Iweala hinted that the FG will adopt austerity measures that will cushion the effect of the slump in oil price on the economy, especially to ensure that it does not hit ordinary Nigerians hard.

In keeping that promise, during the presentation of the 2015 national budget to the National Assembly (NASS), the minister gave a breakdown on aspects of the luxurious lifestyles of Nigerians that government would slam tax on to support dwindling revenue. She listed that government intends to realize N3.7billion from 10% import surcharge on all new private jets entering the country; N1.6 billion from the imposition of 39% import surcharge on luxury yachts as well as another N2.6 billion to be realized from import surcharge on what government terms “luxury cars”.

Okonjo-Iweala explained, somewhat ambiguously, that wealthy Nigerians would pay more for air travel, as those who fly on business and first class tickets would be charged additional monies, but did not immediately state how much exactly. But she was categorical that passengers on economy class, mostly the middle class and poor Nigerians would have no such charges imposed, assuring that salaries of workers will also not be slashed.
Again, the FG said Nigerians who consume expensive champagnes, wines and spirits would have to cough out more to continue enjoying such luxuries in 2015, targeting N2.3billion to be realized from it based on a 30% surcharge on such products.

But what appeared like a bombshell – criticized by some Nigerians – is the imposition of one percent tax on residential mansions in the Federal Capital territory (FCT) on properties valued from N300 million and above. Okonjo-Iweala is targeting N360 million from such taxations annually.

Beyond luxury items, the FG said another N614bn would be fetched from a proposed increment of 5% on Value Added Tax (VAT), which all Nigerians pay, irrespective of social class or income. Other perks of office such as international travels and trainings would also be minimized to essential assignments alone and the FG hopes to realize N82.5billion from that. Also, N6.5billion would be saved from the proposed rationalization of government agencies as contained in the Oronsaya Report while N36 billion would be realized from the review of status exemptions granted some oil companies in the country. And another N44billion will be saved from curtailed expenses on procurement and upgrade of buildings among others, as relevant laws would be enacted in 2015 to give legal backing to areas not covered.
But in spite of the emphasis government placed on what is fast-becoming known as ‘Luxury Tax’, only N10.56 billion is to be realized annually, an amount many describe as a small drop in an ocean of needs. Dahiru Balami, a professor of Economics at the University of Maiduguri told Weekly Trust that taxing luxurious goods by the FG is in line with global practices for economies experiencing drop in national revenues. He said the case of Nigeria is peculiar because over the years, government at all levels hardly factor Internally Generated Revenue (IGR).

“Government would need to strengthen the Federal Inland Revenue Service (FIRS) to properly execute this new assignment or nothing will change. The persons involved are the wealthy, some of whom are decision-makers in the country. The collection mechanism must be strengthened for effectiveness,” he said.

A serving Senator told Weekly Trust that the National Assembly has always been wary of the consequences of the actions of the Executive, saying the government acts without thinking and proper planning. He said: “You would be surprised that Nigerians are not as poor as we are made to believe. Whatever measures being taken by the government is not targeted at the rich but will in one way or the other affects every facet of Nigeria.”

Johnson Odumah, a trader at Nyanya Market, said introducing additional tax on wealthy Nigerians is a welcome idea but he queried how much government thinks can be realized from the endeavour, saying most rich people would not pay the tax and government lacks the muscle to penalize them. “Except the government wears a new face,” he added.

Stephen Shaku, a civil servant, was pessimistic. He said no single government policy in the country has ever worked perfectly in the last couple of years, adding that when the night comes and the economic crunch bites harder, it is the poor Nigerian on the street that would suffer more.
But the Centre for Social Justice (CSJ) accused the FG of violating the Constitution and the Fiscal Responsibility Act in the presentation of the 2015 Budget to the NASS. It also said the recent austerity measures proposed by the government may not yield desired results. Lead Director of the CSJ, Eze Onyekpere, told Weekly Trust that the measures are not deep enough for the kind of fiscal challenge facing Nigeria. He said a “Luxury Tax” will not fetch much and can easily be avoided by the rich. “What is needed is deep and structured cuts to frivolous and wasteful expenditure like the N150billion vote of the NASS, which can be reduced to no more than N50 billion and the votes of the presidency - from the numerous jets to special advisers and assistants who add nothing to governance; funding of pilgrims and pilgrimages, et cetera,” he said.

Hon. Solomon Edojah, a Peoples Democratic Party (PDP) chieftain from Delta sSate told Weekly Trust that tax on luxury goods is a good initiative, but not realizable within the context of Nigeria. He also said Okonjo-Iweala’s response is rather spur-of-the-moment, when she should be a forecaster. He added that she said weeks back that the economy is stable and vibrant, but she is on reverse gear now. “There are no structures for this to happen in Nigeria. Apart from PAYE deducted at source, no other tax is effective and they know the problems, but no one has addressed them. What of people who bought big brand hotels, how much tax do they pay? Good governance must start in earnest, no matter who provides it,” Edojah said.

But General Secretary of the Nigeria Labour Congress (NLC) Comrade Peter Ozo-Eson, also a professor of Economics, expressed support for taxation of luxury goods, saying tax on some of the items should even go higher than government is prescribing.

“Tax on consumption of the super-rich is something that we support. In the light of the lopsidedness in income distribution where 10% control over 60% of the nation’s wealth, the only way to ensure they contribute fairly to nation-building is to tax the items that they consume. In some cases, one bottle of wine they consume is more than the annual salary of an average worker, so they be taxed heavily, not the 3% they are starting with,” he advised.


http://www.dailytrust.com.ng/weekly/index.php/top-stories/18515-2015-budget-rich-nigerians-to-pay-more-for-luxurious-lifestyle