Taxation evokes different emotions for different folks. Take the case of Icelandic students who, under the auspices of the then International Union of Students (IUS), gathered in the streets of Reykjavik to protest the exorbitant charges of Icelandic banks. As if the messages inscribed on their placards and banners weren’t driving their messages home enough, a few nudists broke through the picket lines into the banking halls that dotted the landscape of the city, with the single message inscribed on their bodies, “The banks are stripping us to the bones”. Three decades ago, the actions of the streakers, more than anything else, attracted global media attention and drew support to their cause. Today, taxation, which merely evokes the despair of our citizens, lifts their boats in a different way from the Icelanders.
Since President Tinubu assumed office in May 2023, his administration has enthroned an aggressive taxation regime – a regime that is suffocating and straining citizens and small businesses. The surge in taxes under the guise of economic reforms is pushing poor Nigerians deeper into poverty, exacerbating existing inequalities and stifling opportunities for real growth. Amidst the economic strains which citizens and businesses face is the fundamental question: can excessive taxation lead to prosperity? Economists like Jeffrey Sachs, Okonjo-Iweala, and Paul Collier, and the Civil Rights Attorney, Derrick Bell, have consistently warned against relentless tax hikes that produce negative economic outcomes, especially in countries like ours struggling with weak institutions, high unemployment, and a fragile middle class. Our country’s trajectory under President Tinubu illustrates the dangers they have long warned against.
I shall return to the warnings of these development economists and scholars later in this piece.
It is not in doubt that President Tinubu inherited a precarious economy from the not-fit-for purpose General Buhari who, while on the saddle of leadership for eight years, ruined the lives and roosts of our country; but, his policy responses, however, have remained nothing short of preposterous. In an apparent bid to boost government revenue, his government has rolled out a series of tax increases and levies across virtually every sector. Among the most notable moves is the removal of the fuel subsidy – a decision that triggered a 300% increase in fuel prices overnight. While the government claimed this measure was necessary to reduce fiscal deficits, its impact on ordinary Nigerians is devastating.
The Tinubu administration did not stop there. A raft of new taxes have since followed. A few days ago, the Central Bank of Nigeria announced a new increase in Automated Teller Machine (ATM) fees. Not to be beaten to the game of whom imposes the highest taxation fees, the Nigerian Communication Commission (NCC) announced that it has approved 50% increase in data charges. In spite of the fact that the NCC claimed it approved 50% data charges, telecommunication companies have gone ahead to hike data charges by over 200%, thus making internet access – once a critical tool for business and education- prohibitively expensive for many. The Nigeria Customs Service (NCS) also joined in the madness by imposing a 4% charge on the Free On-Board (FOB) value of imports. Businesses have not been spared either. The government continuously imposes all sorts of taxes on businesses, ostensibly to shore up public revenue. The effect of all of this is the stifling of businesses while investors are fleeing abroad. Small and medium enterprises (SMEs), the backbone of Nigeria’s economy, that bear the brunt of these policies, have either scaled down operations or folded entirely, adding to the already alarming unemployment rate.
In the face of these burdens, the government’s justification for increased taxation has been that it needs to diversify our country’s revenue streams and reduce the dependence on oil. While the justification constantly appears good as a talking point for the spokespersons of the government, nothing suggests that fresh policy proscription exists beyond the hammers and nails of taxation inside the tools’ boxes of the government. Taxing citizens already ruined by the harsh economic climate is akin to fetching water from the stone.
Now, I return to the warnings of the development economists and scholars.
Jeffrey Sachs long warned that tax policies must be enunciated in a way that they don’t stifle growth. Sachs, known for his work on sustainable development, emphasises the importance of creating an enabling environment for private sector growth rather than relying on punitive tax regimes. “Unless the public sector invests, and invests wisely, the private sector will continue to hoard its funds or return them to shareholders in the forms of dividends or buybacks”, he argues in his OP-ED, Sustainable Development Economics. The broader but incisive argument he advances is that over-taxation hurts entrepreneurship and innovation, key drivers of economic growth. Derrick Bell, in his critique of structural inequality, highlights how excessive taxation which impacts vulnerable citizens helps to deepen social division, making it difficult for the disadvantaged and the vulnerable to climb out of poverty.
Paul Collier and Ngozi Okonjo-Iweala, two world’s foremost development experts, offer perhaps the most relevant insights for our country. In their World Bank Report on state fragility, they argue that governments must not only take governance seriously, but also frame development agenda around security, which includes the wellness or wellbeing of citizens, stability, the rule of law, and expanding economic opportunities before embarking on aggressive taxation. In a country like ours where the trust of government business exists as a huge public deficit, tax hikes without corresponding improvements in public services breed resentment and encourage tax evasion. Their analysis is a stark reminder that taxation alone cannot drive development; it must be part of a broader strategy that includes investments in infrastructure, education, and health care.
Tinubu’s government’s current approach lacks this balance. Citizens are being taxed to death with little to show for it in terms of improved public services or infrastructure. The roads remain dilapidated, public schools are in terrible disrepair, and the health care system is on the brink of collapse. These realities make it difficult for Nigerians to see the justification for the government’s aggressive tax policies. Added to the foregoing is the failure of government’s Tax Reforms’ Bills in addressing tax injustice. Our country’s wealthy elites who live outside the tax net are notorious tax evaders, while ordinary citizens who don’t earn even a fraction of what the elites earn bear the full weight of the government’s revenue drive. They are the unfortunate ones that are harassed and harangued by agberos who pass themselves off as tax collectors in the market places of our country. When their wares aren’t seized and carted to God-knows-where, they are told to “go and die”. It is this inequity that fuels citizens’ resentment of government.
What our country needs at this time is not more taxes but better tax policies. The government must shift its focus from increasing tax rates to broadening the tax base, and in a manner that is fair and non-punitive. It also means investing in technology to improve tax collection and reduce corruption. The government must also be very intentional with the way it uses public funds. Citizens will be more willing to pay taxes if they see tangible improvements in their daily lives – better roads, reliable electricity, quality education, and affordable health care. Without these improvements, the government’s tax drive will continue to be seen as exploitative and illegitimate. Beyond all of this, the long term measure for growth and prosperity is for the government to build a more diversified economy that will generate sustainable revenue. This requires serious investments in agriculture, manufacturing, and technology, not lip service.
Driving growth and progress does not entail punishing the citizens in terrible ways. The lessons this government must learn from economists and scholars like Sachs, Okonjo-Iweala, Collier and Bell are clear: prosperity cannot be taxed into existence. Growth comes from innovation, entrepreneurship, and investment, not from squeezing overburdened citizens. If Tinubu fails to learn from these lessons, he risks turning our citizens into perpetual beggars and hitch-hikers on the road to serfdom. Will Tinubu heed the warnings of economists? I don’t think so. After all, he knows that his taxes are killing the citizens. The citizens know they are dying. Anyway, he already knows that the citizens are as good as dead.
