Residents have kicked over the 5 per cent consumption tax introduced by the Kano state Government, saying it would fuel inflation across the socio – economic strata, they would made to pay more on goods and services.
Some of the fears being expressed are in view of the prevailing economic condition of the country which is negatively impacting businesses and the general living standard of Nigerians.
It was gathered that the newly introduced consumption tax will be on goods and services.Kano state Government can take the form of sales taxes, tariffs and other taxes paid on consumed goods and services and in this context it is collected from shopping malls, restaurants, hotels and some other places by the state government.
Explaining the newly introduced tax to a group of stakeholders during a sensitisation workshop, the Director, Legal Services and Enforcement, Kano State Internal Revenue Service (KIRS), Malam Adamu Mohammed, said the law establishing consumption tax mandates business owners to serve as collection agents on behalf of government.
He said under the new law, end users of goods and services would be charged extra 5 per cent on the original price of any service or product at the point of purchase which would be remitted on monthly basis to the state revenue services.
The “Consumption tax is a 5 per cent deduction payable to the state government by consumers of goods and services including hotels, restaurants, entertainment centres, shopping malls, event centres, ‘suya’ spots and the like. Value Added Tax on the other hand is 5 per cent payable by the business owners to the federal government,” the legal services director explained.
Fielding a question on how the tax law will protect consumers from exploitation by business operators, Mohammed said, “I don’t think government anywhere in Nigeria regulates prices; we don’t have such laws now. So if the cost of a product is N10, and you are desperate, you can buy it, but the protection can be in quality and standard.”
Mohammed warned stakeholders on the implication of non-remittance of the funds collected as consumption tax on their respective business endeavours.
“When you deduct, don’t forget that it is not your money, it’s government’s money. The law also states that those who deduct and decide to keep the money beyond the time-frame stipulated by law which is a maximum of one month shall be made to pay 200 per cent of the amount collected,” he said.
He added that anybody who fails to pay the penalty will have his business sealed up by the government.
The law establishing the tax which was gazetted on June 8 by the Kano State government it was learnt, is an offshoot of the Taxes and Levies Act of the Federation 2014 as amended. It empowers the state to collect taxes on hotel services, event centres, supermarkets and shopping malls and ‘suya’ spots to generate revenue for the running of its activities.
However, the new tax regime introduced by Kano State is being perceived as a move to add to the economic woes of Nigerians.
The Executive Secretary, Supermarket Owners’ Association, Kano State chapter, Alhaji Umar Habu Ibrahim, claimed that their association was not consulted for input during the formulation of the law but only told them of its introduction.
He said the tax regime will lead to the closure of many businesses in the state, especially in the “present period of recession when a lot of people are striving hard to keep afloat”.
Some of the stakeholders that spoke to our correspondents in Kano expressed concern over the new tax regime, saying it will lead to hyper-inflation in the state. They argued that since the business owners have free hand to decide the price of their products, there is a chance they will inflate the prices of their goods and services even beyond 100% in the pretext of charging consumption tax.
Engr. Yusuf Ibrahim, a customer at Shoprite (Ado Bayero Mall) argued that the likely implication of the tax regime may outweigh its gains, saying it is a fertile ground for unimaginable inflation. He added that though government needs money to run its affairs, introducing consumption tax in a recession is the worst thing that can happen.
Similarly, a member of the hoteliers association in Kano, Mr. Lawrence Udechukwu, decried what he called multiplicity in taxes payable by the hotel industry and called for harmonisation of taxes by the government to reduce the burden on their businesses.
However, allaying the fears generated by the new tax law, the Director, Government Business, Kano State Internal Revenue Service (KIRS), Abdulsalam Abdulqadir, said consumption tax is purposely targeted at luxury items and that the targeted people are not the poor masses, but the rich in the society.
He said the public should not panic as the state revenue service had already mapped out parameters for the collection of the tax, insisting that it will not affect the poor.
But an economist with a Jigawa State-based budget tracking group, Malam Usman Na’ibi, said whether a rich man buys a commodity or a poor man, the price in the market is the same for all, adding that the rich and the poor pay the same amount for goods and services. He maintained that the tax was not in the interest of the people.
He added that in the case of goods with elastic demand, the tax might not bring in much revenue as it will only raise the price and contract the demand, stressing that when an item is not bought, the question of the tax payment does not arise.
“Such tax causes the price of an article to rise. A fraction of the money unit increased cannot be calculated, so even the middleman tends to charge more than the tax.
“There are a lot of issues that need to be looked into before introducing such tax. We are not saying it is wrong for any government to introduce taxes, what we are saying is, what will happen to the industries that would be discouraged as a result? What would happen to those who pay the taxes without knowing that they have done so?
“There is need for serious sensitization and for transparency for the new tax regime to succeed and serve the purpose for which it was introduced,” Na’ibi said.