There have been misconception that giving tax incentives to the rich help
incentivise job creation, because the capitalists are perceived to be job
creators. The truth is, they do not. Ordinary consumer is more of a job
creator than a capitalist.
Business people taking credit for creating jobs is highly unfair. Business
people hire people as their last resort, as they only hire to keep pace
with the consumer demand. The Nigerian Personal Income Tax act is unfair
for allowing fixed tax rate for resident companies, while varying that of
personal income tax rates.
The rigidity of the resident company tax rate allows for unnecessary
overgrowing of few companies and making many more to close down. Small,
medium and big companies pay 30% of their profits as tax irrespective of
their return and size.
Consequently, rich are getting richer and more citizens that are of middle
class were relegated. Statistics have shown that, we have more unemployment
as number of millionaires increases over time. If number of millionaires
can create jobs, we will not have the level of unemployment we are having
now in the country, which is of a record high (23.9%), this without
including the estimated 30% more that are under-employed.
The individual consumer needs to be incentivised. If the minimum wage is to
keep pace with the inflation rate, the minimum wage would have been
anything above N25, 000 by now just within five years since it was reviewed
to N18, 000. Jobs are consequence of eco-systemic feedback loop between
customers and businesses. If the middle class thrive and do well, both the
capitalist and the poor benefit.
Therefore, let the rich be taxed more, so that we can create more middle
class people, who consumes more and then create jobs by virtue of their
consumptions. Company tax system should be proportionate to the income
level. Business with profit less than N80 million should be taxed at 25%,
business profits above N80 million but not up to N500 million should be
taxed at 30%, and any profit margin above N500 million should be taxed at
35%.
This should not include companies operating in the petroleum sector. There
should not be credit breaks for big companies, unless for special
circumstances. However, tax breaks can be allowed for small and medium
companies. Minimum wage should be upgraded to N25,000.
With the pending austerity measures, government expenditure (recurrent)
must be reduced by at least 10% every year for four years, the tax rates
should be increased and compliance enforced. Compliance will not be a big
deal because people now have trust and confidence on the government.
However, there should be immediate reflection of benefits derived from tax
payments. This should be showcased in areas like improving access to
electricity, increasing the minimum wage, improving access to quality and
affordable health care and educational system.
All leakages of government revenue resulting from corruption should be
blocked and channelled that to power sector at least in the short term.
Thank you
Ahmed Adamu (PhD) is the President, Commonwealth Youth Council