Nigeria News

NIGERIA: Lagos State and the Taxation of Owambe

 Taxation is the life-blood of the administration in Lagos state and the Lagos state government takes its life-blood very seriously indeed. Lagos generated N60 billion in internally generated revenue (IGR) in 2006. Four years later, in 2010, IGR in Lagos had more than doubled to N168 billion. Tax revenues make up the lion’s share of Lagos state’s IGR at 65% of it in 2006 and as much as 83% in 2010. This year, the state government projects that it will generate around N316.6 billion internally, 80% of which will come from taxes on Lagosians.

The growth of the state’s IGR is nothing short of phenomenal compared to the rest of the country. While Lagos currently generates about N20 billion every month, Kano struggles at N2 billion while Bayelsa generates a paltry N1 billion. Lagos state’s impressive ability to squeeze billions in taxes, rates and charges out of the pockets of its 21 million citizens is born out of necessity. Lagos received N168 billion in 2012 from the federation account (excluding derivation and excess crude payments). Akwa Ibom state on the other hand received N217 billion. The reason for this discrepancy is oil. Akwa Ibom is the largest oil producing state in Nigeria, with as many as eight oil producing local governments. When it comes down to it, Lagosians are the only abundant natural resource available to Lagos state.

Lagos has limited options if it wants to sustain and even expand its impressive year-on-year internal revenue growth. One way is to make the state’s tax collection infrastructure more robust and effective by strengthening the tax net, eliminating waste, clamping down on tax evaders and capturing more of the 4 million eligible but untaxed workers in Lagos. Of the 8 million taxable individuals in the informal sector only 2.5 million were captured in the tax net last year. Lagos state Commissioner of Economic Planning and Budget, Mr Ben Akabueze described this last week when he told the press “The intention was not to impose any hardship on the residents as the administration would not introduce new taxes or increase the tax rates, but to make more people pay their taxes ”.

A second option is to widen the tax net by identifying taxable but currently untaxed economic activity. Lagos is doing just that with the merriment tax local governments in the state are now demanding. According to Commissioner for Local Government and Chieftaincy Affairs, Ademorin Kuye, “Over N1billion is spent monthly in Lagos state on entertainment and parties, we have the records to confirm this and these people, how many of them pay tax? The money goes into drinks, wine, food, aso-ebi and all of that and when they spend all of this money; they do not want to pay anything to the government…this justified the reason why local Governments demand that anyone organising events in the state must pay the Merriment Tax…. There is merriment tax in that constitution, it’s part of the rate Local Governments can collect. We have not fully utilised the benefit of the entertainment industry in this state”.

The merriment tax is provided for in the Taxes and Levies (Approved list for collection) Act of 1988, not in the constitution as erroneously stated by Mr. Kuye. The tax is already being collected by local governments in the state and is proving to be deeply unpopular with Lagosians. It is probably not politically correct to say this but Lagosians have a serious partying addiction. We do not want to pay taxes although we are perfectly happy to spend N12 billion a year on parties, champagne and aso ebi. Nigerians reportedly spent N9.4 billion in 2012 on imported champagne alone. God knows how much we spent on imported aso ebi, but I suspect it must be an equally scandalous amount. The N1 billion monthly spend on parties and entertainment in Lagos is equal to the monthly IGR of Bayelsa state. Personally, I find this to be a frightening statistic, one that does not suggest that we have the right priorities as a society.

These days, Lagos is the venue of a massive arms race, with each wedding now trying to ‘out-party’, ‘out-champagne’ and ‘out aso-ebi’ the next. If Lagosians have so much money to invest in owambe and faaji then they really shouldn’t be so upset when the state government comes for its share of the endless partying that seems to be going on. According to a recent report by Renaissance Capital (RenCap) ‘Nigeria Unveiled: Thirty Six Shades of Nigeria’, the planned rebasing of Nigeria’s Gross Domestic Product (GDP) is expected to raise Lagos state to Africa's 13th biggest economy by 2014, equivalent to that of Ghana. As the state continues to grow it will need to continue to mine its only available natural resource. That means more money out of your pocket and more money out of mine. It’s for a good cause though and Lagosians had better get used to paying these taxes. If you don’t like it you can always relocate.

Ogun state is right next door. Eko o ni baje o!

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