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What is wrong with Okorocha’s “Development Levy”?

The Imo State Governor, Rochas Okorocha, recently ordered the payment of N3000 development levy to the State Government by all adults who can be levied, raising questions regarding the legality of the development in relation to what the law actually stipulates.

According to the State’s Commissioner for Community Government, Culture, and Traditional Affairs, Louis Duru, the money which is due from at least 2000 registered adults in each of the 637 autonomous communities would be used for  “autonomous community adult development”.

“To facilitate the payment, the State Government, through the ministry of CGC, since September 2016, has provided community adult registers for all autonomous communities in the state where the communities will enlist the names of at least 2000 leviable adults.”

Duru added that recognised communities will serve as the collectors and they are to pay not less than N6 million each, while also warning that erring Traditional rulers and communities would have their allowances suspended.

He also said Government has concluded arrangements to embark on sensitisation meetings with traditional rulers at the local government areas to further emphasize His Excellency’s directives and monitor compliance.

The issue of development levy was first introduced by the State in 2016 which resulted in a heated disagreement between the State Government and lawmakers who described the policy as unacceptable.

According to Hon Mike Iheanetu, representing Aboh Mbaise State Constituency, his constituents said they cannot raise the money due to the economic hardship of the State in particular, and the country in general.

But reacting to the lawmakers, the Governor through his Commissioner for Information, Tourism and Public Utilities, Hon Obinna Nshirim, said the levy is money paid into the account of each community and to which the State Government adds its own quota for development of the communities. He also emphasized that the general contribution will encourage monitoring of projects because the people will be more concerned about what their money is being used for.

The same development levy was also introduced in Osun State in 2016 by Governor Rauf Aregbesola and was also met with frowns and stiff rejection as the stakeholders involved said they were already paying in the various associations they belonged to.

They argued that the EDL would mostly affect low-income earners and there is a need for more dialogue between themselves and the Government.

A Precedence, from nowhere

Development levy as a form of tax was introduced by the Federal Government in 1998 to curb the over-dependence on oil which inhibits the development of other sectors of the Nation’s economy including an efficient and effective tax administration system.

Prior to the global economic meltdown, local governments and state governments, with very low internally generated alternative sources of income outside the revenue derived from the federation account, resorted to collecting fees which many says has frustrated the growth of small businesses.

This led to the enactment of Taxes and Levies (Approved list for collection) Decree No 21 of 1998 under the administration of General Abdulsalam Abubakar.

The approval was divided into three namely;

Approved List of Taxes for Collection by the Federal Government of Nigeria which include;

  1. Companies Income Tax;
  2. Petroleum Profit Tax;
  3. Value Added Tax;
  4. Education Tax;
  5. Capital Gains Tax for employees and residents of the Federal Capital Territory, Abuja (“FCT”)
  6. Personal Income Tax in respect of the remuneration of members of the armed forces, the Police, residents of FCT, staff of the ministry of foreign affairs and non-resident individuals are authorised to be collected by the Federal Government of Nigeria.

Approved List of Taxes for Collection by the State Government;

  1. Personal Income Tax on the income of individuals only( Pay-As-You-Earn (PAYE); and
  2. Direct Taxation (Self-Assessment),
  3. withholding tax for individuals only,
  4. capital gains tax for individuals only,
  5. stamp duties fees on instruments executed by individuals only,
  6. pool betting and lotteries tax,
  7. gaming and casino taxes,
  8. road taxes,
  9. business premises registration fees for urban and rural areas,
  10. development levy for individuals only,
  11. street naming registration fees in the State capital only,
  12. right of occupancy fees on land owned by the government in urban areas of a State,
  13. market taxes and levies where State finance is involved.

Approved List of Taxes to be collected by Local Government;

  1. shops and kiosks rates,
  2. tenement rates,
  3. on and off liquor license fees,
  4. slaughter slab fees,
  5. marriage, birth, and death registration fees,
  6. street naming registration fees for non-urban area streets,
  7. right of occupancy fees on lands in rural areas,
  8. market taxes and levies excluding where the State used its finances to construct the market
  9. motor parks levies,
  10. domestic animals license fees,
  11. religious places permit fees,
  12. signboard and advertisement permit fees,
  13. wrong parking charges,
  14. vehicle radio license fees to be imposed by the local government where the vehicle is registered,
  15. merriment and road closure levy,
  16. domestic animal license fees.

The law stated that any business premises in an urban area of Nigeria is required to be registered on the payment of a N10,000 registration fee in the first year of registration, and N5,000 per annum as renewal registration fees in the subsequent years while business premises in the rural areas are required to pay the registration fee of N2,000 for the first year of registration, and N1,000 per annum as registration renewal fees for the subsequent years.

A development fee of N100 per annum per individual is also liable for payment by each taxable individual in the entire Country.

While the law explicitly recognizes and stated that not more than N100 is liable to be paid as development levy, the Government is charging N3000 which is far above the recognized amount.

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