Fix the Fiscal Federation
Executive Summary
The Federal government has abrogated to itself massive power over virtually every economic activity in Nigeria. This makes the states and Local Governments useless and makes the cost of running the federal government obscene. A key figure to take away is that the FGN spends 63% on its workers to provide these services to the Nigerian people.
The proposal is for the President to present a Bill to reduce the powers, specifically the fiscal powers of the Federal Government by devolving tax powers to states and Local governments.
What is the problem with Nigeria fiscal structure?
1. The Federal Government legislates and collects all fiscal revenue.
Nigeria is a federal republic In Nigeria, the fiscal power should be based on a three-tiered structure of federal, state and local governments but this is not so. The Nigerian tax system favours the federal government, as pointed out by the Study Group on Tax Reform (2003), the federal government accounts for 99% of the tax revenue in Nigeria.
All fiscal enactment powers are held by the Federal Government e.g. Personal income tax (PIT) is legislated by the federal government, payable by individuals, but collected by state authorities. For concurrent taxation such as the capital gains tax and stamp duties, the federal government retains legislative power, while sharing administrative powers with the states. The federal government has jurisdiction for such taxes as VAT and Education tax. The federal government taxes corporate bodies while state and local governments tax individuals.
The state and local governments have had no freedom to introduce new taxes because matters dealing with taxation are on the Exclusive list of the constitution. They may enact laws only with the concurrence and approval of the National Assembly
Why is this problem?
1. It deprives the states and Local governments the ability to use taxation as a means of earning revenue or attracting investment.
States like Lagos earn almost 80% of their income from the PIT, but they cannot determine the rate to apply to attract investment. The Company Income Tax CIT and the VAT are collected in states. Lagos State may build roads and attract multinationals to Lekki but the federal government will take the revenues generated by these multinationals.
It also put all the states in the same bracket in terms of tax policy. Ogun state for instance cannot use a lower VAT or CIT rate as an incentive to attract investors from Lagos to Ogun. Yobe state cannot declare a tax free zone to attract Dangote Industries to set up a factory there.
States like Lagos also see no incentive to enforce the payment of taxes as these taxes are sent to the centre. The CBN estimates that Lagos has about 60% of the manufacturing and commercial activity in Nigeria. Lagos is the generator of the highest VAT and the highest Customs duty, but it does not see these tax benefits. It is, instead, shared anchored on such factors as equality of states (40 per cent), population (30 per cent), landmass and terrain (10 per cent), social development needs (10 per cent), and internal revenue efforts (10 per cent). This sharing formula, discouraging revenue drive, particularly for federally adjudicated taxes e.g. VAT.
2. The federal government is reckless with spending.
The tax (and revenue) collected is used to pay federal workers.
Take the figures for 2010, the total receipts for Companies Income Tax, VAT and Customs duty was N1.40t (net of cost of collection, gross collection was N1.52t). Let us now look at the total non-debt cost of the federal government (salaries, pensions) that is N2.54t.
In effect, the total tax revenues of the nation are swallowed up by personal cost of the federal government. An argument can be made that oil revenues are actually paying the salaries of the federal workers but keep in mind that non-oil revenues made up 34% of the total revenue in 2010.
In addition, how many federal workers do we have in Nigeria? The federal workers take home 63% of the total revenues of the nation, (tax and oil receipts).
3. It makes Local governments ineffective.
The current fiscal structure created a situation where the Local governments must exist at the mercy of the federal and state government.
Primary schooling is the exclusive responsibility of local governments; the constitution states, “The functions of a local government council shall include the provision and maintenance of primary, adult and vocational education”. We then wonder how Nigerian children can be educated by taxes charged on items such as fees on marriages, motor parks and bicycles.
Unlike States who can charge Personal Income Taxes generate billions of Naira (like Lagos), the Local governments have been “allocated” very poor means of livelihood and are thus unable to serve the citizens of the LGA.
What can GEJ do about it?
• Amend the constitution to allocate to the three theirs of the federation appropriate income-generating taxes to enable them fulfil their constitutional requirements. The federal government cannot simply tax the wealth of Nigeria and spend it on only the federal workers. Such a move will discourage the payment of taxes.
• Devolve most of the powers from the exclusive list to the concurrent and the forth schedule or and duties of the Local governments e.g. Insurance, stamp duties as a whole, and VAT.
• The states and Local governments should share VAT
• States to determine and charge Personal Income Tax
• Local Governments to charge Property taxes, charge, and collect the education taxes
• Pass a law that will cap how much of the federal, state or Local Government earnings can be allocated to recurrent expenditures. This is specifically to forestall a situation where taxes are charged just to maintain the lifestyle of workers.
It’s important to note that The former president of the NBA has presented a private bill to the National Assembly for an Act to alter the Constitution of the Federal Republic of Nigeria 1999 by creation of the States Court of Appeal, introduction of Federal and State Legislative Lists and adjustments/modifications of legislative powers of government between the Federal and State Governments."
Agbakoba said the present "bloated federal system" had made governance too expensive to support any meaningful development in the country.
The bill seeks to replace the "Exclusive Legislative List" with "Federal Legislative List" with respect to powers limited to the federal government and introduced the "State Legislative List" for powers exclusive to the state governments.
Issues recommended in the bill for devolution to the states include natural and mineral resources, excluding petroleum and gas; agriculture; micro finance banks; municipal police, state appeal courts; solemnisation of marriages; incorporation of business enterprises with state objects; taxes on income and profits within states, other than income and profits of companies; regulation of labour and industrial relations at the state level, including prescription of minimum wage; and evidence.
It is our problem and we will fix it.
Saturday, July 2, 2011
Saturday, June 11, 2011
repeal the Land Use Act
An Act to Vest all Land compromised in the territory of each State (except land vested in the Federal government or its agencies) solely in the Governor of the State , who would hold such Land in trust for the people and would henceforth be responsible for allocation of land in all urban areas to individuals resident in the State and to organisations for residential, agriculture, commercial and other purposes while similar powers will with respect to non urban areas are conferred on Local Governments.(27th March 1978) Commencement.
1. Repeal the land Use Act.
In simple terms, the Land Use Act places a government official between a legal contract of ownership and sale of land. It places all land in the hands of government and specifies that future transfers or sale of land must be authorised by a government official irrespective of the value of the transaction. "It shall not be lawful for any customary right of occupancy or any part thereof to be alienated by assignment, mortgage, transfer of possession, sublease or otherwise howsoever -
(a) Without the consent of the Governor in cases where the property is to be sold by or under the order of any court under the provisions of the applicable Sheriffs and Civil Process Law; or
(b) in other cases without the approval of the appropriate Local Government."
Land Use Act
The main issues of the Land Use Act of 1978 is that it transfers title and ownership of land from individuals and communities to the Governors of the states who hold the land in trust. It also makes acquisition of land by individuals and corporate bodies for commercial, agricultural and economic development purposes extremely difficult.
This leads to transaction bottlenecks, cumbersome and tiresome processing of title documents and negative wealth as all land without a C of O cannot be brought into any formal transaction. Consider that if a client wanted to buy or sell a Rolls Royce or an oil Refinery, the transaction would involve both parties' legal teams, but crucially it would not need the consent or accent of any government official before the sale is approved.
Another contentions issues is the changing of the legal status of the Nigerian land "user" from ownership to that of statutory occupancy. In effect no Nigeria owns any land, we simply have a statutory right to use it, this limits the rights of the "user" i.e. your proprietary interests are extinguished.
The argument against repel will rest with the issues government has in securing land from private citizens for the greater public good e.g., building a road over private land. These concerns can be address by passing a bill to give the Federal and State Government the power to acquire land under the Right of Eminent Domain, i.e. the superior dominion of the sovereign over individual property rights. The Land Use is in fact a universal application of this Eminent Domain right.
The repeal of the Land Use Act will immediately give millions of Nigerians "equity". They can own, transfer and/or sell the land they live on, put up that land as collateral, bring the land into the formal market place and make property transactions easier to finance via financial institutions.
The Repeal will boost Nigeria mortgage market, it will create jobs as realtors, surveyors, estate agents, and builders will have more opportunities and more property to bring into the market.
Most importantly, the repel of the Act will open agricultural land otherwise "locked" up in administrative red tape in the Local Governments. Farmers can negotiate directly with the local community for sale or lease of hectares of arable land to grow food, considering that 70% of Nigerians labour is agricultural based, the bottle neck of ownership of land if removed will instantly increase the acreage of land available to agriculture.
Its important to note that that Late President Umaru Musa Yar'Adua had sent 14 Amendment clauses (titled Land Use Act (Amendment) Act 2009 or the Constitution (First Amendment) Act 2009) to the National Assembly for the purpose of amendment.
So i would like the president to push the 7th congress to consider and pass these 14 amendment clauses or simply sponsor a new bill to repel the Land use Act.
Without land, there is no wealth.
Its our Problem, we will fix it.
1. Repeal the land Use Act.
In simple terms, the Land Use Act places a government official between a legal contract of ownership and sale of land. It places all land in the hands of government and specifies that future transfers or sale of land must be authorised by a government official irrespective of the value of the transaction. "It shall not be lawful for any customary right of occupancy or any part thereof to be alienated by assignment, mortgage, transfer of possession, sublease or otherwise howsoever -
(a) Without the consent of the Governor in cases where the property is to be sold by or under the order of any court under the provisions of the applicable Sheriffs and Civil Process Law; or
(b) in other cases without the approval of the appropriate Local Government."
Land Use Act
The main issues of the Land Use Act of 1978 is that it transfers title and ownership of land from individuals and communities to the Governors of the states who hold the land in trust. It also makes acquisition of land by individuals and corporate bodies for commercial, agricultural and economic development purposes extremely difficult.
This leads to transaction bottlenecks, cumbersome and tiresome processing of title documents and negative wealth as all land without a C of O cannot be brought into any formal transaction. Consider that if a client wanted to buy or sell a Rolls Royce or an oil Refinery, the transaction would involve both parties' legal teams, but crucially it would not need the consent or accent of any government official before the sale is approved.
Another contentions issues is the changing of the legal status of the Nigerian land "user" from ownership to that of statutory occupancy. In effect no Nigeria owns any land, we simply have a statutory right to use it, this limits the rights of the "user" i.e. your proprietary interests are extinguished.
The argument against repel will rest with the issues government has in securing land from private citizens for the greater public good e.g., building a road over private land. These concerns can be address by passing a bill to give the Federal and State Government the power to acquire land under the Right of Eminent Domain, i.e. the superior dominion of the sovereign over individual property rights. The Land Use is in fact a universal application of this Eminent Domain right.
The repeal of the Land Use Act will immediately give millions of Nigerians "equity". They can own, transfer and/or sell the land they live on, put up that land as collateral, bring the land into the formal market place and make property transactions easier to finance via financial institutions.
The Repeal will boost Nigeria mortgage market, it will create jobs as realtors, surveyors, estate agents, and builders will have more opportunities and more property to bring into the market.
Most importantly, the repel of the Act will open agricultural land otherwise "locked" up in administrative red tape in the Local Governments. Farmers can negotiate directly with the local community for sale or lease of hectares of arable land to grow food, considering that 70% of Nigerians labour is agricultural based, the bottle neck of ownership of land if removed will instantly increase the acreage of land available to agriculture.
Its important to note that that Late President Umaru Musa Yar'Adua had sent 14 Amendment clauses (titled Land Use Act (Amendment) Act 2009 or the Constitution (First Amendment) Act 2009) to the National Assembly for the purpose of amendment.
So i would like the president to push the 7th congress to consider and pass these 14 amendment clauses or simply sponsor a new bill to repel the Land use Act.
Without land, there is no wealth.
Its our Problem, we will fix it.
Friday, March 11, 2011
of Jobs and Government
I just saw a news article that the Ekiti state Governor Kayode Fayemi conducted a survey and discovered that 250,000 youths in his state were unemployed; hence, he "employed 25,000 of them into the Ekiti Volunteer Corp.
The Governor must be commended for showing the need to inquire about employment figures in his state but i fear his solution is short term and a mirage because no government Federal State or Local govt can create jobs.
you hear it all the time, GEJ says he will create jobs, Fashola says he created jobs, but the reality is that if those jobs are not created in the private sector then really no job has been created, the government (state of federal) has simply taken tax revenues which could have built roads or hospitals, and converted them to recurrent expenditures.
A job is created when a demand exists and an entrepreneur hires a person to fill that vacancy. The government by collecting tax revenue has reduced the amount of jobs that entrepreneur can create.
In the short term, Ekiti and others can employ to reduce poverty, but a longer-term plan is to reward companies that employ by giving them tax breaks or concessions. The State can simply grade companies according to how much PAYE the company remits and then do a 50% tax break back to them.
Dangote just signed an agreement with BOI to advance billion to them to loan out at zero interest rates to small scale manufactures, a better approach is to tell Dangote he will get a 50% import duty waiver on every bag of rice he imports for every staff he remits PAYE for based on the minimum wage, same for Shell and Co, reduce the fees the pay to the NNPC, and Department of Petroleum Resources based on how many Nigerian they submit PAYE based on minimum wage.
To submit PAYE they must employ remember.
Ekiti certainly does not have many private sector companies so their challenge is to use their FAAC Oil allocation to build infrastructure and attract Dangote out of high tax states like Lagos to Ekiti. Using the oil money to pay salaries only starts a vicious cycle of high taxes to pay salaries, which drive off private sector investors.
It is our problem we have to fix it
The Governor must be commended for showing the need to inquire about employment figures in his state but i fear his solution is short term and a mirage because no government Federal State or Local govt can create jobs.
you hear it all the time, GEJ says he will create jobs, Fashola says he created jobs, but the reality is that if those jobs are not created in the private sector then really no job has been created, the government (state of federal) has simply taken tax revenues which could have built roads or hospitals, and converted them to recurrent expenditures.
A job is created when a demand exists and an entrepreneur hires a person to fill that vacancy. The government by collecting tax revenue has reduced the amount of jobs that entrepreneur can create.
In the short term, Ekiti and others can employ to reduce poverty, but a longer-term plan is to reward companies that employ by giving them tax breaks or concessions. The State can simply grade companies according to how much PAYE the company remits and then do a 50% tax break back to them.
Dangote just signed an agreement with BOI to advance billion to them to loan out at zero interest rates to small scale manufactures, a better approach is to tell Dangote he will get a 50% import duty waiver on every bag of rice he imports for every staff he remits PAYE for based on the minimum wage, same for Shell and Co, reduce the fees the pay to the NNPC, and Department of Petroleum Resources based on how many Nigerian they submit PAYE based on minimum wage.
To submit PAYE they must employ remember.
Ekiti certainly does not have many private sector companies so their challenge is to use their FAAC Oil allocation to build infrastructure and attract Dangote out of high tax states like Lagos to Ekiti. Using the oil money to pay salaries only starts a vicious cycle of high taxes to pay salaries, which drive off private sector investors.
It is our problem we have to fix it
Friday, February 18, 2011
Promise Tracker: GEJ women get 35% of posts
" President Jonathan assured women that his administration would honour the 35 per cent “affirmative slots” for them in ambassadorial and ministerial offices".
Thursday, February 17, 2011
Obama's Middle East policy, can you spot it?
Iran 1, Obama tweets, does nothing, popular uprising crushed by Basij
Tunisia, Obama plays golf, Ben Ali out
Egypt, Obama does not know what to do, then asks Mubarack to quit, Army takes over, the US endorses Military Coup
Yemen, Obama says nothing, riots continue
Libya, Obama says nothing, riots continue
Bahrain, obama says nothing, Riots crushed 3am
Iran 11, protests ongoing, American support terpid.
what will be the response (if any) if riots break out in Saudi Arabia?
Tunisia, Obama plays golf, Ben Ali out
Egypt, Obama does not know what to do, then asks Mubarack to quit, Army takes over, the US endorses Military Coup
Yemen, Obama says nothing, riots continue
Libya, Obama says nothing, riots continue
Bahrain, obama says nothing, Riots crushed 3am
Iran 11, protests ongoing, American support terpid.
what will be the response (if any) if riots break out in Saudi Arabia?
Ribadu Promise Tracker
The Action Congress of Nigeria (ACN) yesterday kicked off its presidential campaign with a colloquium in Abuja. the Flag Bearer Nuhu Ribadu has promised that an ACN administration would “bring to all Nigerians a sense of hope that would radiate across the land when the party initiates its one million houses a year and through this scheme alone, open the doors for 30 million jobs.
Wednesday, February 16, 2011
can we boo?
Why do Lagos fans boo the national football team the Super Eagles when they perceive they are not playing according to the fans desires? The common answer is that its constructive criticism, “booing makes the players play well” really? These is a reason why the home team has an advantage you know.
In football, any good team needs the home crowd to be the “12 man” i.e. an unfair advantage. Cheering inspires and propels 11 men to become superheroes, but booing (especially when you deep down the fans want a victory) is cutting off your nose to spite your face.
So if Lagos fans are not to boo the super eagles but to stick with them because deep down we all want a victory, can the Nigerians boo or critic the President? After all, we all seek the same thing ie victory for Nigeria, Same analogy?
Kalu, its different, in football we have a common enemy. It can be the Idomie Lions of Cameroon or the Silly stars of Guinea, but in politics the President could be pursuing a socialist agenda and the opposition can be pursuing a capitalist agenda. Really?
the fans can still critic the Eagles with their cash, they can refuse to buy tickets and refuse to turn up and watch the Eagles play, in all these the message is still being passed along, but the act of publically ridiculing the national team undercuts the common purpose.
What do you think?
In football, any good team needs the home crowd to be the “12 man” i.e. an unfair advantage. Cheering inspires and propels 11 men to become superheroes, but booing (especially when you deep down the fans want a victory) is cutting off your nose to spite your face.
So if Lagos fans are not to boo the super eagles but to stick with them because deep down we all want a victory, can the Nigerians boo or critic the President? After all, we all seek the same thing ie victory for Nigeria, Same analogy?
Kalu, its different, in football we have a common enemy. It can be the Idomie Lions of Cameroon or the Silly stars of Guinea, but in politics the President could be pursuing a socialist agenda and the opposition can be pursuing a capitalist agenda. Really?
the fans can still critic the Eagles with their cash, they can refuse to buy tickets and refuse to turn up and watch the Eagles play, in all these the message is still being passed along, but the act of publically ridiculing the national team undercuts the common purpose.
What do you think?
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