Allow me to make use of a Bible account to start out this text. Whether or not a Christian or not, this account of Solomon’s son highlights some key facets relating to authorities and taxation. The passage is from 1 Kings 12:1-20, describing when Rehoboam turned king after Solomon, the son of David:
Rehoboam went to Shechem, the place all Israel had gathered to make him king. When Jeroboam son of Nebat heard of this, he returned from Egypt, for he had fled to Egypt to flee from King Solomon. The leaders of Israel summoned him, and Jeroboam and the entire meeting of Israel went to talk with Rehoboam. “Your father was a hard master,” they mentioned. “Lighten the harsh labor demands and heavy taxes that your father imposed on us. Then we will be your loyal subjects.”
Rehoboam replied, “Give me three days to think this over. Then come back for my answer.” So the individuals went away.
Then King Rehoboam mentioned the matter with the older males who had recommended his father, Solomon. “What is your advice?” he requested. “How should I answer these people?”
The older counselors replied, “If you are willing to be a servant to these people today and give them a favorable answer, they will always be your loyal subjects.”
However Rehoboam rejected the recommendation of the older males and as a substitute requested the opinion of the younger males who had grown up with him and have been now his advisers. “What is your advice?” he requested them. “How should I answer these people who want me to lighten the burdens [taxes] imposed by my father?”
The younger males replied, “This is what you should tell those complainers who want a lighter burden: ‘My little finger is thicker than my father’s waist! Yes, my father laid heavy burdens [taxes] on you, but I’m going to make them even heavier! My father beat you with whips, but I will beat you with scorpions!’”
Three days later Jeroboam and all of the individuals returned to listen to Rehoboam’s choice, simply because the king had ordered. However Rehoboam spoke harshly to the individuals, for he rejected the recommendation of the older counselors and adopted the counsel of his youthful advisers. He advised the individuals, “My father laid heavy burdens on you, but I’m going to make them even heavier! My father beat you with whips, but I will beat you with scorpions!”
So the king paid no consideration to the individuals. This flip of occasions was the need of the Lord, for it fulfilled the Lord’s message to Jeroboam son of Nebat via the prophet Ahijah from Shiloh.
When all Israel realized that the king had refused to hearken to them, they responded,
“Down with the dynasty of David!We have no interest in the son of Jesse.Back to your homes, O Israel!Look out for your own house, O David!”
So the individuals of Israel returned dwelling. (emphasis added)
There may be actually nothing new beneath the solar. This occurred greater than 2,900 years in the past (ca. 922-901 BC). The earlier chief of the nation, Solomon, had burdened the individuals with excessive taxes and rules, and the individuals have been experiencing the detrimental penalties of these burdens. Then got here the brand new chief and the individuals got here to him asking for tax cuts—not elimination of taxes. Nevertheless, he deliberate to extend taxes. In consequence, the dominion break up and he by no means regained full management.
It’s deja vu in Africa. It began with Kenya, the individuals groaning beneath “big government” crying for aid. As an alternative, what did President William Ruto do? He tried to go a brand new finance invoice—egged on by the “opinion of young men” just like the Worldwide Financial Fund—to extend taxes on the individuals. This included taxes and levies on bread, transportation, and even sanitary pads, in line with BBC Africa. The reasoning behind it was to cut back the nation’s debt burden. What was the tip end result? The very same factor that occurred within the passage above—individuals rose as much as oppose the president; this time violently.
To not be outshone by Kenya, the Nigerian federal authorities is within the strategy of passing its personal tax will increase beneath a set of tax reform payments. And, similar to the younger advisers within the passage, the federal government has its personal “young men”—a presidential committee headed up by a tax veteran of greater than 20 years.
The tax reform payments are 4 in quantity, which are supposed to cowl a brand new method for sharing value-added tax (VAT) among the many federal and state governments, the creation of a centralized tax assortment company, and the plan to make use of know-how to observe the financial institution accounts of all residents of the nation to try to forestall any leaks in taxes. The rationale behind this tax improve is to generate extra money for capital expenditure by the federal government, get rid of a number of taxations by completely different authorities companies/sub-national governments, and drastically scale back authorities cash printing. It was very nice to listen to the federal government tax czar overtly admit that authorities cash printing to cowl deficit spending causes worth inflation. You’ll by no means hear that from the central financial institution or most mainstream economists within the nation.
After all—being an skilled and savvy individual—the tax czar is aware of that piling on extra tax will increase (from 7.5 % to 10 %, and probably to fifteen % in two years) isn’t going to fly. Even he was towards the elevated VAT from 5 % to 7.5 % in 2019, as proven in his personal tweets in 2019:
So, how do they promote this concept to extend taxes and drive everybody right into a government-monitoring system of each banking, funding, cost platform that any citizen could also be a person of? The reply is by advertising and marketing the tax rises as being for under the wealthy.
One other advertising and marketing ploy is to state that Nigeria has one of many lowest VAT charges on this planet, that the poor could be exempted from revenue taxes, small companies would get tax credit from the federal government which might counter any results, and debt/money-printing would go down if the invoice turns into legislation. The issue is that many of those statements, assumptions, and guarantees are usually not precisely portrayed. For instance, on the declare that Nigerians pay the bottom VAT, here’s a chart that completely wrecks such claims:
The chart clearly reveals that, regardless of Nigeria having the bottom VAT fee, the inflation fee greater than compensates for the low VAT. Sure, Nigerians pay much less VAT, however they pay way more within the inflation tax, thus, the rational factor to do can be to get the inflation right down to single digits earlier than considering any improve in taxes. Different taxes which aren’t considered in authorities tax information are native authorities taxes, similar to TV license prices on companies, taxes on bus drivers, and police checkpoint “taxes” on items being transported interstate.
There may be additionally no proof that elevated income for the federal government would result in diminished deficit spending. As we have now seen from Western nations, elevated authorities income often comes with extra authorities spending. Actually, many of the debt taken on behalf of African nations by their leaders finally ends up being shared by worldwide brokers, governments, and their cronies, with little or no going to the unusual residents. When the curiosity invoice comes due, unusual residents who profit least are requested to foot the invoice.
What’s the answer? Restructure the prevailing debt, reduce authorities spending and money-printing to permit financial savings to build up into capital, which might be led by the non-public sector. Quite than being in a rush to develop into Dubai in two years, let capital accumulate in an analogous means a beforehand unemployed new graduate progressively begins to build up belongings over a multi-year interval when he lastly will get a job.
Proper now, sadly the foremost bone of competition among the many political elite and economist class on the tax improve payments isn’t the tax will increase themselves, however which nationwide or sub-national authorities will get a bigger share of the elevated tax income. We fear that this can be the “Smoot-Hawley Tariff moment” within the present financial scenario in Nigeria. If it passes, Nigeria might plunge down into the deep.