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    Kenya and Nigeria: Mountaineering Taxes When There Is Nothing Left to Tax

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    Allow me to make use of a Bible account to begin this text. Whether or not a Christian or not, this account of Solomon’s son highlights some key elements concerning authorities and taxation. The passage is from 1 Kings 12:1-20, describing when Rehoboam turned king after Solomon, the son of David:

    Rehoboam went to Shechem, the place all Israel had gathered to make him king. When Jeroboam son of Nebat heard of this, he returned from Egypt, for he had fled to Egypt to flee from King Solomon. The leaders of Israel summoned him, and Jeroboam and the entire meeting of Israel went to talk with Rehoboam. “Your father was a hard master,” they mentioned. “Lighten the harsh labor demands and heavy taxes that your father imposed on us. Then we will be your loyal subjects.”

    Rehoboam replied, “Give me three days to think this over. Then come back for my answer.” So the folks went away.

    Then King Rehoboam mentioned the matter with the older males who had endorsed his father, Solomon. “What is your advice?” he requested. “How should I answer these people?”

    The older counselors replied, “If you are willing to be a servant to these people today and give them a favorable answer, they will always be your loyal subjects.”

    However Rehoboam rejected the recommendation of the older males and as an alternative requested the opinion of the younger males who had grown up with him and have been now his advisers. “What is your advice?” he requested them. “How should I answer these people who want me to lighten the burdens [taxes] imposed by my father?”

    The younger males replied, “This is what you should tell those complainers who want a lighter burden: ‘My little finger is thicker than my father’s waist! Yes, my father laid heavy burdens [taxes] on you, but I’m going to make them even heavier! My father beat you with whips, but I will beat you with scorpions!’”

    Three days later Jeroboam and all of the folks returned to listen to Rehoboam’s resolution, simply because the king had ordered. However Rehoboam spoke harshly to the folks, for he rejected the recommendation of the older counselors and adopted the counsel of his youthful advisers. He advised the folks, “My father laid heavy burdens on you, but I’m going to make them even heavier! My father beat you with whips, but I will beat you with scorpions!”

    So the king paid no consideration to the folks. This flip of occasions was the need of the Lord, for it fulfilled the Lord’s message to Jeroboam son of Nebat by the prophet Ahijah from Shiloh.

    When all Israel realized that the king had refused to take heed to them, they responded,

    Down with the dynasty of David!
    We have no interest in the son of Jesse.
    Back to your homes, O Israel!
    Look out for your own house, O David!”

    So the folks of Israel returned house. (emphasis added)

    There’s actually nothing new beneath the solar. This occurred greater than 2,900 years in the past (ca. 922-901 BC). The earlier chief of the nation, Solomon, had burdened the folks with excessive taxes and laws, and the folks have been experiencing the destructive penalties of these burdens. Then got here the brand new chief and the folks got here to him asking for tax cuts—not elimination of taxes. Nevertheless, he deliberate to enhance taxes. Because of this, the dominion break up and he by no means regained full management.

    It’s deja vu in Africa. It began with Kenya, the folks groaning beneath “big government” crying for aid. As a substitute, what did President William Ruto do? He tried to move a brand new finance invoice—egged on by the “opinion of young men” just like the Worldwide Financial Fund—to extend taxes on the folks. This included taxes and levies on bread, transportation, and even sanitary pads, in accordance to BBC Africa. The reasoning behind it was to scale back the nation’s debt burden. What was the tip outcome? The very same factor that occurred within the passage above—folks rose as much as oppose the president; this time violently.

    To not be outshone by Kenya, the Nigerian federal authorities is within the strategy of passing its personal tax will increase beneath a set of tax reform payments. And, similar to the younger advisers within the passage, the federal government has its personal “young men”—a presidential committee headed up by a tax veteran of greater than twenty years.

    The tax reform payments are 4 in quantity, which are supposed to cowl a brand new system for sharing value-added tax (VAT) among the many federal and state governments, the creation of a centralized tax assortment company, and the plan to make use of know-how to observe the financial institution accounts of all residents of the nation to attempt to stop any leaks in taxes. The rationale behind this tax enhance is to generate extra money for capital expenditure by the federal government, eradicate a number of taxations by completely different authorities businesses/sub-national governments, and drastically cut back authorities cash printing. It was very nice to listen to the federal government tax czar overtly admit that authorities cash printing to cowl deficit spending causes value inflation. You’ll by no means hear that from the central financial institution or most mainstream economists within the nation.

    After all—being an skilled and savvy particular person—the tax czar is aware of that piling on extra tax will increase (from 7.5 p.c to 10 p.c, and presumably to fifteen p.c in two years) will not be going to fly. Even he was towards the elevated VAT from 5 p.c to 7.5 p.c in 2019, as proven in his personal tweets in 2019:

    So, how do they promote this concept to extend taxes and drive everybody right into a government-monitoring system of each banking, funding, fee platform that any citizen could also be a person of? The reply is by advertising the tax rises as being for under the wealthy.

    image 114

    One other advertising ploy is to state that Nigeria has one of many lowest VAT charges on the planet, that the poor could be exempted from earnings taxes, small companies would get tax credit from the federal government which might counter any results, and debt/money-printing would go down if the invoice turns into regulation. The issue is that many of those statements, assumptions, and guarantees are usually not precisely portrayed. For instance, on the declare that Nigerians pay the bottom VAT, here’s a chart that completely wrecks such claims:

    image 115

    The chart clearly reveals that, regardless of Nigeria having the bottom VAT price, the inflation price greater than compensates for the low VAT. Sure, Nigerians pay much less VAT, however they pay much more within the inflation tax, thus, the rational factor to do shall be to get the inflation all the way down to single digits earlier than considering any enhance in taxes. Different taxes which aren’t considered in authorities tax information are native authorities taxes, corresponding to TV license prices on companies, taxes on bus drivers, and police checkpoint “taxes” on items being transported interstate.

    There’s additionally no proof that elevated income for the federal government would result in diminished deficit spending. As now we have seen from Western nations, elevated authorities income normally comes with extra authorities spending. In actual fact, many of the debt taken on behalf of African nations by their leaders finally ends up being shared by worldwide brokers, governments, and their cronies, with little or no going to the atypical residents. When the curiosity invoice comes due, atypical residents who profit least are requested to foot the invoice.

    What’s the resolution? Restructure the present debt, minimize authorities spending and money-printing to permit financial savings to build up into capital, which might be led by the non-public sector. Moderately than being in a rush to grow to be Dubai in two years, let capital accumulate in an analogous method a beforehand unemployed new graduate step by step begins to build up property over a multi-year interval when he lastly will get a job.

    Proper now, sadly the most important bone of rivalry among the many political elite and economist class on the tax enhance payments will not be the tax will increase themselves, however which nationwide or sub-national authorities will get a bigger share of the elevated tax income. We fear that this can be the “Smoot-Hawley Tariff moment” within the present financial state of affairs in Nigeria. If it passes, Nigeria could plunge down into the deep.

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