How paucity of funds pushed Ekiti into a tax war
It is a common phenomenon across the world that people are reluctant
to pay tax, therefore, enforcement of tax laws often comes with
resistance from the public.
Before now, taxation was never been an issue in Ekiti but with the
dwindling allocation from the federation account, coupled with the heavy
debt burden which has reduced the state’s allocation from an average of
N2.6bn in recent times, to an all time low of N1.4 billion in the month
of October, has made the necessity of tax collection beyond the
traditional pedestal of Pay As You Earn) from civil servants a necessity
if the state must avoid being declared insolvent.
Fighting tax evasion
To meet the challenge of the monthly wage bill of N2.6bn, the state government, under the leadership of Governor Ayodele Fayose has to take up the gauntlet and find the political will of enforcing the various tax laws, by ensuring that Ekiti people, especially traders and some corporate business owners pay their taxes as at when due.
But getting these categories of people, especially traders to pay taxes has not been a tea party, as some traders have stuck to their guns, daring the state government with protests in resistance to the payment of the taxes.
This ugly trend could be blamed partly on the inability of successive government’s to enforce the tax law, which has made an average Ekiti person, aside from government workers to view taxation as not only burdensome but unnecessary punishment from the government.
Until the incumbent government decided to invoke the almost comatose tax laws, government-imposed taxes, levies, and other relevant charges seem alien to an average Ekiti trader, unlike what obtained in some other more advanced states in the Federation, like Lagos and Abuja, among others.
Butchers in the state owned abattoirs, tipper drivers and owners and other transporters who make use of government funded and managed terminals have all been enjoying state owned facilities without being bothered, in most cases, to pay taxes on the use of these facilities.
Some corporate organisations such as telecommunication operators and financial institutions that have their outlets in the state have daily enjoy the robust patronage of Ekiti people, are also guilty, some of them were said to be owing the state several millions of Naira of unpaid taxes.
In a recent enforcement drive embarked upon by the state government through the state’s Ministry of Commerce, Industries and Cooperatives, a number of banks and telecommunication outfits were sealed off, the Ekiti State Commissioner for Commerce, Industries and Cooperatives, Mr Michael Ayodele, said the affected business outfits owed the state government money running to millions of Naira.
Ayodele added that some of the affected firms had not paid the said tax in the last three years. The Commissioner, who led officials of his ministry to seal off the affected business premises, said the government took the action following repeated warnings to the organisations to fulfil their financial obligations to the state.
He wondered why corporate bodies, making a lot of money from the state, would find it difficult to pay their taxes. According to him, people and business outfits must be alive to their civic responsibilities, it is not good when an organisation operates in a state and makes money and refuses to pay the necessary taxes to the state government.
“We all know that the current economic realities require the blocking of all financial leakages and looking inward for the government to generate funds,” the Commissioner explained.
Agitations greet govt’s tough postures
A fortnight ago, the state government through the Ministry of Agriculture and Rural Development, suspended the operation of butchers across all towns and villages in Ekiti as measures taken to ensure that the butchers comply with the governor’s earlier directive that each of them pays a N1000 tax on a slaughtered cow in the state abattoirs.
The action led to protests and strike actions by the butchers and government reacted by closing down the abattoirs until its directive was complied with.
Explaining reasons for the government’s action to the Vanguard, the state Commissioner for Agriculture and Rural Development, Mr. kehinde Odebunmi, who predicated the government action on the refusal of the butchers to pay taxes levied on them.
The Commissioner had directed that various abattoirs would remain closed until further notice and pending the time the butchers indicate strong desire to pay the tax. He had clarified that the action taken was part of alternative measures being employed to shore up dwindling revenue into state.
He had also warned that any butcher that disobeyed the closure order shall be made to pay a fine of N20,000 and face the full wrath of the law. After three day strike action, when butchers realised that the government was unyielding, they backed down, decided to comply with the state’s directive and appealed for the opening of the abattoirs.
On November 17, tipper owners in Ekiti repeated the resistance earlier put up by the butchers, the union directed their members to suspend operations indefinitely following the state governor’s directives that they also pay a tax of N1000 per trip into the coffers of state government.
The union also frowned at government’s imposition of a fine of N50,000 being punishment for tipper owners who disobeyed the directive on payment of the said tax. Acting under the aegis of the Union of Tipper and Quarry Employers of Nigeria, Ekiti State chapter , the union described the imposition of the tax as “unacceptable” and the fine of N50,000 imposed on any member who defaults in paying it as “outrageous.”
The state government had through a letter dated 12th November, 2015 and marked EK/MRDA/11/78 and signed by the Commissioner for Commerce, Industries and Cooperatives, Michael Ayodele, communicated its desire to impose the tax of N1,000 per trip which it described as “haulage fee.”
The letter reads in part: “The meeting deliberated on the current financial position of Ekiti State vis-à-vis the need to provide social amenities for citizens.
Socialamenities
“Consequently, the Union is hereby notified that a haulage levy of the sum of N1,000 only shall be paid on each Tipper load of gravel and sand. This covers the entire state. “The measure takes effect from Monday, 16th November, 2015. Any defaulter will have his vehicle impounded by a Task Force and to be released on the payment of a fine of N50,000.”
State chairman of the tipper owners’ union, Chief James Olujimi Mokoa, said he had no option than to tell his members to withdraw their services because “we don’t have any N50,000 fine to pay.” “We voted-in the governor and this is supposed to be the government of the masses. This government is turning to something else. We can’t be paying N1,000 per trip.”
The chairman said that members of the union had been paying levies to the Federal Ministry of Solid Minerals including N20,000 annual renewal fee, N9,000 royalty levy and processing fee of N10,000. “We told the governor that this is double taxation and he said his decision is final, he said he can’t change his words, he stated”
Commissioner for Information, Lanre Ogunsuyi said the N1,000 “haulage levy” was for maintenance of road plied by the tippers urging union members “to show understanding and comply because there is no going back.” Though, the tipper owners, as at the time of filing the report, are yet to call off their strike, but the government also “to show understanding and comply because there is no going back.”
Though, the tipper owners, as at the time of filling the report, are yet to call off their strike, but with stick to their guns, unyielding.
Why the tax drive?
In a chat with Vanguard, the Chief Press Secretary to the State Governor, Mr. Idowu Adelusi said that measures being taken by Governor Fayose to shore up the internal revenue of the state ought not to cause friction between the people and the government.
He said these actions became necessary because of paucity of funds and the need to shore up the revenue base of the state, in a bid to take care of the welfare of the citizens of the state and ensure the execution of some projects of strategic importance to the people of the state.
In his words, “Ekiti people voted Ayo Fayose as Governor of Ekiti State, and they are expecting good governance from him. Good governance entails, peace and stability, overall development of the state, economically, morally, physically and socially and for a Governor to deliver on these, there must be money because all these cannot be done in isolation.
“ What is coming into the state as monthly federal allocation is very far below what is expected, and you can see that the money in question reduces each month. For instance, the last one that came in month of October was N1.4 billion, and the total monthly wage bill in Ekiti State is N2.6 billion, including the subventions to the Ekiti State University, College of Education, Ikere, College of Health Technology in Ijero, Ekiti State Teaching Hospital, teachers and workers salaries among others.
“That means if you deduct what has come from N2.6 billion, you have N1.2 billion shortage and that necessitates the need for the government to look inwards so as to shore up the state revenue.
“ If the people want to continue to enjoy the peace and security that we now have, if the people want to continue enjoy the street lights for security in Ekiti, there is need to buy diesel to power the generators, if the people wants water to continue to flow in our pipes, there is need to buy alum, and other chemicals and all these are bought with money.
So, there is a need for the government to look inwards and augment the one coming from Federal Government, to shore up internally generated revenue. “Truth is that in Ekiti, until now, the people do not reckon with tax. Everything has been virtually free. Ekiti people have been enjoying everything free and that cannot continue.
Any government that refuses to look inwards now would soon crash. And that is why the governor himself explained to the people that you elected me and you want dividends of democracy from me; and so there is a need for little little tax and the money realised from these taxes are going to be used for the development of the state and for the benefit of the people”.
“Although, as expected, there were pockets of protests here and there but now the affected people have come to realise that there is a need for them to make some sacrifice. The butchers in question have agreed and are already paying the N1000.
“ The money is for the maintenance of the Abattoir, provide water, packing of the dirts there and other things, it is the government that takes care of them all. The workers in the abattoir are being paid by the government. Besides, on a slaughtered cow, the butchers could make about N20,000 and N25,000 daily.
And look at all these patent medicine shop owners, many of them have been operating for long without regularised documents. “Even the banks and other institutions where the state should be generating IGR have been left unexplored for so long, nothing is being generated from them.
“ And now that we have a reasoning governor who has started to look inwards to generate revenue for the state, the people have welcomed the idea. And let me tell you, the reason why these people could see reasons with the governor and support him is because they have seen his transparency and accountability in running the affairs of the state.
“Governor Fayose is the only governor in Nigeria who would announce the federal allocation coming to the state at the end of the month to all the members of the public. Not only that, he is the only the same governor who has constituted a committee of stakeholders in the state who would meet to deliberate on how to share the allocation as it comes.
“The committee consists of representatives of all workers who earn salary from the state, state university staff, state teaching hospital, labour and many others, “ Adelusi said. Despite the financial challenges, Governor Fayose has disagreed with his fellow governors over their decision to review the payment of N18,000 wage, and has vowed not to retrench workers in its employ.
The governor, who started a sensitisation tour of local governments on the financial situation of the state recently, said sacking workers was not the solution to the problem. He said allocations to both state and local governments had gone down drastically, and cited the case of what the 16 local governments had received in the last few months.
“A comparative analysis of the allocations to local governments in Ekiti between January to October 2014 and the same period this year would clearly explain what I am talking about.
“During that period in 2014, the local governments got over N22 billion, while they were given N15 billion for the same period this year. A shortfall of over N5 billion. What even came in last month was terrible. We therefore decided to pay primary school teachers in September and paid local government workers in October.
“Now, the issue is should we now skip a month and pay all workers at once or keep rotating the payment of salaries among different categories of workers? You are the ones to decide,” the governor said.
Bail-out fund and expectation of fresh intervention
However, it is now very clear that various intervention from the Federal Government to address the economic crunch through the bail-out fund which was released recently to states seemed not to be doing any magic, as the state governments are faced with sustainability of funds to meets their various needs.
Another respite that is being expected from the federal government to cushion the effects of the economic downturn, as revealed by Governor Fayose was the expected sharing of the remaining money in the Excess Crude Oil Account (ECA), which is put at over $2 billion.
While disclosing that the state is expected to earn about N10 billion from the ECA largesse, Fayose quickly added that the money would go into the funding of capital projects.
Explaining why the ECA would be closed down, Fayose said, “Nothing is no longer going into the Excess Crude Oil Account because oil is selling lower than the envisaged price in the international market. That has badly affected all of us. The 2015 Budget in Ekiti was predicated on oil selling at $65 a barrel, but it sells for over $40 now. “That has left our budget performing only in the area of Recurrent Expenditure.
“The capital projects that we have embarked upon since we came on board are being executed because we are prudent, transparent and open, and also because we are leveraging on goodwill with corporate bodies,” he said. Fayose said there was no way people could dodge paying taxes, rates and levies, adding that government would be crippled without finances.
Ayodele Fayose
Fighting tax evasion
To meet the challenge of the monthly wage bill of N2.6bn, the state government, under the leadership of Governor Ayodele Fayose has to take up the gauntlet and find the political will of enforcing the various tax laws, by ensuring that Ekiti people, especially traders and some corporate business owners pay their taxes as at when due.
But getting these categories of people, especially traders to pay taxes has not been a tea party, as some traders have stuck to their guns, daring the state government with protests in resistance to the payment of the taxes.
This ugly trend could be blamed partly on the inability of successive government’s to enforce the tax law, which has made an average Ekiti person, aside from government workers to view taxation as not only burdensome but unnecessary punishment from the government.
Until the incumbent government decided to invoke the almost comatose tax laws, government-imposed taxes, levies, and other relevant charges seem alien to an average Ekiti trader, unlike what obtained in some other more advanced states in the Federation, like Lagos and Abuja, among others.
Butchers in the state owned abattoirs, tipper drivers and owners and other transporters who make use of government funded and managed terminals have all been enjoying state owned facilities without being bothered, in most cases, to pay taxes on the use of these facilities.
Some corporate organisations such as telecommunication operators and financial institutions that have their outlets in the state have daily enjoy the robust patronage of Ekiti people, are also guilty, some of them were said to be owing the state several millions of Naira of unpaid taxes.
In a recent enforcement drive embarked upon by the state government through the state’s Ministry of Commerce, Industries and Cooperatives, a number of banks and telecommunication outfits were sealed off, the Ekiti State Commissioner for Commerce, Industries and Cooperatives, Mr Michael Ayodele, said the affected business outfits owed the state government money running to millions of Naira.
Ayodele added that some of the affected firms had not paid the said tax in the last three years. The Commissioner, who led officials of his ministry to seal off the affected business premises, said the government took the action following repeated warnings to the organisations to fulfil their financial obligations to the state.
He wondered why corporate bodies, making a lot of money from the state, would find it difficult to pay their taxes. According to him, people and business outfits must be alive to their civic responsibilities, it is not good when an organisation operates in a state and makes money and refuses to pay the necessary taxes to the state government.
“We all know that the current economic realities require the blocking of all financial leakages and looking inward for the government to generate funds,” the Commissioner explained.
Agitations greet govt’s tough postures
A fortnight ago, the state government through the Ministry of Agriculture and Rural Development, suspended the operation of butchers across all towns and villages in Ekiti as measures taken to ensure that the butchers comply with the governor’s earlier directive that each of them pays a N1000 tax on a slaughtered cow in the state abattoirs.
The action led to protests and strike actions by the butchers and government reacted by closing down the abattoirs until its directive was complied with.
Explaining reasons for the government’s action to the Vanguard, the state Commissioner for Agriculture and Rural Development, Mr. kehinde Odebunmi, who predicated the government action on the refusal of the butchers to pay taxes levied on them.
The Commissioner had directed that various abattoirs would remain closed until further notice and pending the time the butchers indicate strong desire to pay the tax. He had clarified that the action taken was part of alternative measures being employed to shore up dwindling revenue into state.
He had also warned that any butcher that disobeyed the closure order shall be made to pay a fine of N20,000 and face the full wrath of the law. After three day strike action, when butchers realised that the government was unyielding, they backed down, decided to comply with the state’s directive and appealed for the opening of the abattoirs.
On November 17, tipper owners in Ekiti repeated the resistance earlier put up by the butchers, the union directed their members to suspend operations indefinitely following the state governor’s directives that they also pay a tax of N1000 per trip into the coffers of state government.
The union also frowned at government’s imposition of a fine of N50,000 being punishment for tipper owners who disobeyed the directive on payment of the said tax. Acting under the aegis of the Union of Tipper and Quarry Employers of Nigeria, Ekiti State chapter , the union described the imposition of the tax as “unacceptable” and the fine of N50,000 imposed on any member who defaults in paying it as “outrageous.”
The state government had through a letter dated 12th November, 2015 and marked EK/MRDA/11/78 and signed by the Commissioner for Commerce, Industries and Cooperatives, Michael Ayodele, communicated its desire to impose the tax of N1,000 per trip which it described as “haulage fee.”
The letter reads in part: “The meeting deliberated on the current financial position of Ekiti State vis-à-vis the need to provide social amenities for citizens.
Socialamenities
“Consequently, the Union is hereby notified that a haulage levy of the sum of N1,000 only shall be paid on each Tipper load of gravel and sand. This covers the entire state. “The measure takes effect from Monday, 16th November, 2015. Any defaulter will have his vehicle impounded by a Task Force and to be released on the payment of a fine of N50,000.”
State chairman of the tipper owners’ union, Chief James Olujimi Mokoa, said he had no option than to tell his members to withdraw their services because “we don’t have any N50,000 fine to pay.” “We voted-in the governor and this is supposed to be the government of the masses. This government is turning to something else. We can’t be paying N1,000 per trip.”
The chairman said that members of the union had been paying levies to the Federal Ministry of Solid Minerals including N20,000 annual renewal fee, N9,000 royalty levy and processing fee of N10,000. “We told the governor that this is double taxation and he said his decision is final, he said he can’t change his words, he stated”
Commissioner for Information, Lanre Ogunsuyi said the N1,000 “haulage levy” was for maintenance of road plied by the tippers urging union members “to show understanding and comply because there is no going back.” Though, the tipper owners, as at the time of filing the report, are yet to call off their strike, but the government also “to show understanding and comply because there is no going back.”
Though, the tipper owners, as at the time of filling the report, are yet to call off their strike, but with stick to their guns, unyielding.
Why the tax drive?
In a chat with Vanguard, the Chief Press Secretary to the State Governor, Mr. Idowu Adelusi said that measures being taken by Governor Fayose to shore up the internal revenue of the state ought not to cause friction between the people and the government.
He said these actions became necessary because of paucity of funds and the need to shore up the revenue base of the state, in a bid to take care of the welfare of the citizens of the state and ensure the execution of some projects of strategic importance to the people of the state.
In his words, “Ekiti people voted Ayo Fayose as Governor of Ekiti State, and they are expecting good governance from him. Good governance entails, peace and stability, overall development of the state, economically, morally, physically and socially and for a Governor to deliver on these, there must be money because all these cannot be done in isolation.
“ What is coming into the state as monthly federal allocation is very far below what is expected, and you can see that the money in question reduces each month. For instance, the last one that came in month of October was N1.4 billion, and the total monthly wage bill in Ekiti State is N2.6 billion, including the subventions to the Ekiti State University, College of Education, Ikere, College of Health Technology in Ijero, Ekiti State Teaching Hospital, teachers and workers salaries among others.
“That means if you deduct what has come from N2.6 billion, you have N1.2 billion shortage and that necessitates the need for the government to look inwards so as to shore up the state revenue.
“ If the people want to continue to enjoy the peace and security that we now have, if the people want to continue enjoy the street lights for security in Ekiti, there is need to buy diesel to power the generators, if the people wants water to continue to flow in our pipes, there is need to buy alum, and other chemicals and all these are bought with money.
So, there is a need for the government to look inwards and augment the one coming from Federal Government, to shore up internally generated revenue. “Truth is that in Ekiti, until now, the people do not reckon with tax. Everything has been virtually free. Ekiti people have been enjoying everything free and that cannot continue.
Any government that refuses to look inwards now would soon crash. And that is why the governor himself explained to the people that you elected me and you want dividends of democracy from me; and so there is a need for little little tax and the money realised from these taxes are going to be used for the development of the state and for the benefit of the people”.
“Although, as expected, there were pockets of protests here and there but now the affected people have come to realise that there is a need for them to make some sacrifice. The butchers in question have agreed and are already paying the N1000.
“ The money is for the maintenance of the Abattoir, provide water, packing of the dirts there and other things, it is the government that takes care of them all. The workers in the abattoir are being paid by the government. Besides, on a slaughtered cow, the butchers could make about N20,000 and N25,000 daily.
And look at all these patent medicine shop owners, many of them have been operating for long without regularised documents. “Even the banks and other institutions where the state should be generating IGR have been left unexplored for so long, nothing is being generated from them.
“ And now that we have a reasoning governor who has started to look inwards to generate revenue for the state, the people have welcomed the idea. And let me tell you, the reason why these people could see reasons with the governor and support him is because they have seen his transparency and accountability in running the affairs of the state.
“Governor Fayose is the only governor in Nigeria who would announce the federal allocation coming to the state at the end of the month to all the members of the public. Not only that, he is the only the same governor who has constituted a committee of stakeholders in the state who would meet to deliberate on how to share the allocation as it comes.
“The committee consists of representatives of all workers who earn salary from the state, state university staff, state teaching hospital, labour and many others, “ Adelusi said. Despite the financial challenges, Governor Fayose has disagreed with his fellow governors over their decision to review the payment of N18,000 wage, and has vowed not to retrench workers in its employ.
The governor, who started a sensitisation tour of local governments on the financial situation of the state recently, said sacking workers was not the solution to the problem. He said allocations to both state and local governments had gone down drastically, and cited the case of what the 16 local governments had received in the last few months.
“A comparative analysis of the allocations to local governments in Ekiti between January to October 2014 and the same period this year would clearly explain what I am talking about.
“During that period in 2014, the local governments got over N22 billion, while they were given N15 billion for the same period this year. A shortfall of over N5 billion. What even came in last month was terrible. We therefore decided to pay primary school teachers in September and paid local government workers in October.
“Now, the issue is should we now skip a month and pay all workers at once or keep rotating the payment of salaries among different categories of workers? You are the ones to decide,” the governor said.
Bail-out fund and expectation of fresh intervention
However, it is now very clear that various intervention from the Federal Government to address the economic crunch through the bail-out fund which was released recently to states seemed not to be doing any magic, as the state governments are faced with sustainability of funds to meets their various needs.
Another respite that is being expected from the federal government to cushion the effects of the economic downturn, as revealed by Governor Fayose was the expected sharing of the remaining money in the Excess Crude Oil Account (ECA), which is put at over $2 billion.
While disclosing that the state is expected to earn about N10 billion from the ECA largesse, Fayose quickly added that the money would go into the funding of capital projects.
Explaining why the ECA would be closed down, Fayose said, “Nothing is no longer going into the Excess Crude Oil Account because oil is selling lower than the envisaged price in the international market. That has badly affected all of us. The 2015 Budget in Ekiti was predicated on oil selling at $65 a barrel, but it sells for over $40 now. “That has left our budget performing only in the area of Recurrent Expenditure.
“The capital projects that we have embarked upon since we came on board are being executed because we are prudent, transparent and open, and also because we are leveraging on goodwill with corporate bodies,” he said. Fayose said there was no way people could dodge paying taxes, rates and levies, adding that government would be crippled without finances.
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