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Published On: Tue, Nov 12th, 2019

Tax and minimum wage proliferation: A camouflage of economic enslavement

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By Oluwatunmininu Adetoro

It seems like a phased triumph for Nigerians as the 30,000 minimum wage has just been approved by the National Assembly.
However, we can see the jubilation transposing into an illusion, by the propositions of the duo— Udoma Udo Udoma and Babatunde Fowler; the Minister of Budget & Planning and Executive Chairman Federal Inland Revenue Service respectively.
Rather than basking in the euphoria following the approval of the New Minimum wage, Nigerians must be aware and sensitive to the effects of increment of Value Added Tax (VAT) by the government, does it not connote a sense of economic delusion and slavery or what I call cyclical policy fraud?.
Taking us through the memory lane, it is pertinent to note that the Nigerian workers under the aegis of the Nigeria Labour Congress (NLC), went on an indefinite warning strike on Thursday September 26th, 2018 to press their demand for an upward review of the National Minimum wage from 18,000 to 56,000 which was later cut down to 30,000 which in itself tends not to be a living wage. This proposal which was initially rejected based on the excuse that Nigeria does not possess the resource to increase minimum wage has obviously shown that less attention is given to the fact that Nigerian legislators are among the highest paid (if not highest paid) legislators in the world.
Recall that President Muhammadu Buhari on 9th of January, 2019 inaugurated a technical committee headed by Bismark Rewane; the MD/CEO of Financial Derivatives, to help the government find ways of implementing a new national minimum wage without disrupting the nation’s development plans. The number two term of reference of the committee as spelt out by the president is that the committee should — identify new revenue sources, as well as areas of existing expenditure from where some savings could be made in order to fund the wage increase without adversely impacting the nation’s development goals as set out in the Economic Recovery and Growth Plan.
Then the question is how does tax increment relate with the second term? Tax is an existing source of revenue therefore, increasing it does not in any way comply with the term which is to identify new revenue sources not hike existing ones. And if the committee cannot identify new revenue sources then I would suggest that the cost of governance should be reduced. There are some redundant government Ministries, Departments and Agencies or those that are replicas of one another which can be merged or cut off thereby savings will be possible from expenditures as stipulated by the term. Hence, the increment of tax is a contradiction of the terms of reference given to the committee by the president. It is also pertinent to note that the Executive Chairman of the FIRS and the permanent secretary of the Ministry of Budget and National Planning are part of the committee. So, does that mean they didn’t take cognisance of the terms of reference or they forgot?
Research also shows that they earn more than the United States President going home with $1.7 million as compared to the $400,000 of the United States’ President.
In fact, an average legislators’ pay is more than 50 times Nigeria’s GDP per capita, In a country where millions are living on less than two dollars daily.
The strike was eventually suspended after the government had decided to review the wage.
According to the duo, as mentioned earlier, the government’s proposition to issue a 50% increase on the value added tax (VAT) on commodities, an increase from 5% to 7.5% is to enable the government fund the new minimum wage of 30,000 per month as approved by the National Assembly. This the government officials have hinted during an interactive session with the National Assembly on Tuesday 19th March, 2019 that VAT is likely to go up.
Now the question here is; if the government has decided to increase the VAT to pay minimum wage, how then has there been a difference whatsoever in the acclaimed good they have done to the citizens by increasing the wage? This suggests that the government intends to use the citizens money to pay them and indirectly impoverish them the more. This is an obvious instance of Peter robbing John to pay him back the debt he owed.
The questions we should ask are; Did the government not think of a way to achieve the minimum wage earlier? Is increasing tax the long lasting solution Nigerians need? Was there no structured plan on ground to fund the wage? What then was the basis of the discussions and meetings of the tripartite committee set up to look into the matter?
Well, according to one of the published story of the Daily Post; The Secretary to the Government of the Federation has disclosed that the federal government has made provisions for implementation of the 30,000 New Minimum wage. He stated that while addressing some reporters in Abuja adding that the government was committed to the implementation. Boss Mustapha was quoted to have said “Whatever comes out of it, I can tell you that this President has sufficient capital in terms of his integrity to own up whatever the Nigerian people decide”.
Mustapha had explained that the government has made adequate arrangement in the 2019 Appropriation Bill, to cater for the new wage. If the SGF was quoted to have made those statements,
Then why the drama irony? Why do we now have a Minister in the same administration giving us a flimsy reasons for the increment of tax? Is this not an economic scam by the government? If the government does not stick to it’s word of making provision for the wage without adding salt to Nigerians’ wound by increasing tax, then we will not only be the world capital for poverty as earlier announced, we would as well become the most suitable reference for what I call “Povertology” which I define as the art and science of poverty.
My point of view remains that, if the government is really particular and intentional about the welfare of its citizens, committed to bringing its people out of extreme poverty, then it shouldn’t be by increment of tax to fund minimum wage as that will in no way be of help or good to the people.
The government should therefore look into the adverse effect of the proposed increment.
I can categorically state that, if tax is being increased, it would so affect the Nigerian market to the local level that even a bus conductor on the Nigerian road will hike the transportation fee and blame it on the increment of the tax, a retail fruit seller would hype the price of goods for the same reason and so would others.
So, how then does the 30,000 minimum wage become effective in improving the people’s standard of living if they now have to earn more but spend more on goods and services. *”What a rat race” Revolving in an economic circle believing that you’re moving forward.
I stand to say, that the increment of tax is a way by which the Nigerian government is planning to recycle the poor living standard of its citizens, of which the minimum wage was supposed to increase.
The increment of tax is only a strategy to use the people’s money(through heavy taxation) to pay the people back (as salaries).
According to report, China has lifted 68.53million people out of poverty over the past five years after Chinese President Xi Jinping took power, I see no reason why our government cannot employ such strategies as China or better still start thinking of a long lasting and root cause solutions to end the poverty rate of the Nation, rather than increasing minimum wage and retrieve it through taxation.
The policy makers, legislators and government as a whole should take up the responsibilities to look into the population growth rate, literacy and illiteracy levels, science and technological advancements amongst other areas to move Nigerians out of extreme poverty and not just sit in expensive offices, cars siphoning the Nation’s wealth, or misusing the statement ‘we are serving the people’. It’s nothing but an adverse good.
Oluwatunmininu Adetoro is a Public Affairs Analyst.

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