Kaduna State: Development Levy and matters arising

By Yusuf Ishaku Goje

The Executive Chairman, Dr. Zaid Abubakar, of Kaduna Internal Revenue Service (KADIRS), last year announced at a press conference that by 2021 every adult in the state will annually pay a mandatory N1000 development levy.

The planned enforcement is backed by the just amended Kaduna State Tax (Codification and Consolidation) Law, 2020; which states in Section 9 (2) (First Schedule, Part I) that: “Development Levy (assessable by Local Governments in collaboration with Traditional Rulers and collectible by Internal Revenue Service). Every taxable adult resident in the State shall pay annual Development Levy of One thousand Naira only (N1,000.00) or as shall be reviewed by the Governor and published in the Gazette from time to time.”

In defending the decision by the State government, the Chairman of the agency opined that: “As the name implies, the development levy is for the development of the state. We are all living witnesses of the economic transformation taking place in the state”. However, the announcement, which took many by surprise, was greeted with mixed reactions by residents of the State; with the preponderance of opinions kicking against it.

Particularly, as it is coming at a difficult time when the income of millions of poor households have been hit hard by the resultant negative impact of Covid-19 on household income, businesses and the economy at large. Available data from reputable multilateral development partners clearly shows that we are in for a rough economic ride over the next few years. This is further corroborated by the bleak picture coming from data recently released by the National Bureau of Statistics. More worrisome is that inflation is fast heading to the rooftop and the people are barely eking out a living.

Many opined that the enforcement and increase in the rate of the development levy from N100 to N1000 is ill-timed and insensitive to the suffering of millions of poor residents. Not also being unmindful that the state has up to 84.9% of its residents earning less than the international poverty line of $1.90 per day, using PPP conversion to 2011 exchange rates and inflation adjustment, according to the Kaduna General Household Survey, 2017. The NBS report had also estimated Kaduna’s $1 per day poverty rate in 2010-11 to be 61.8%, five percentage points above the national average.

Despite this disturbing scenario, the public needs to be circumspect by stepping back a bit to objectively reflect on the pros and cons of the increase in development levy. The reactive outburst is justifiable considering the times and low trust in government, but we need not make the mistake of throwing away the baby with the birth water. This is more so because development levy is not a new concept to the state; as most people pay it in their community development associations and private schools.”

Furthermore, before its recent amendment it had been a part of the Tax Law, 2016. Previously, section 9 (2) of the law stated that: “Development Levy (Collected by Board of Internal Revenue Services)payable by individual per annum not more than N100.00.”

Also, Kaduna state is not the first to follow this path. We have states like Ebonyi who have also taken the bull by the horn by introduction of the N750 development levy in private schools aimed at enhancing infrastructural development in the state. Lagos state is another that enforces the development levy on its residents. Beyond our borders we have countries like Tanzania that is presently enforcing it.

Nevertheless, it is evident that a lot of the opinions against the decision to enforce development levy are doing so without providing a viable alternative solution to funding our desired infrastructure development. Our debt profile as a state is already on the high side. As at December 31, 2019, it stood at N248, 106,791,344, with N8, 898,311,155 being total domestic debt and N169, 208,480,189 as total external debt. At the same period our total public debt service stood at N5, 845,600,959.

It is an indisputable fact that infrastructure development is the enabler for profitable investments, better livelihoods, inclusive growth, meaningful development and poverty reduction. Therefore, it means that one way or the other we cannot shy away from investing in infrastructure either through loans (meaning more debt) or internal revenue mobilization (more burden on residents).

For instance, according to the Kaduna State Infrastructure Master-plan (2018-2050), Kaduna State has a total of 2,133.59km of roads, out of which only 49.20% (1,049.72km) are in good state, 22.09% (471.25km) are in fair state and 28.71% (612.63km) are in poor. These infrastructure deficits also cut across sectors like education, health, among others.

A state that has an annual 2.5% population growth, with total population projected to reach almost 10 million by 2020, and located in the north-west, the region with the highest rate of inequality in Nigeria; is one that the leaders must be committed to taking unpopular but courageous fiscal decisions that will provoke opposition, especially by those it is targeted to benefit.

Regardless of which side of the debate one stands, the truth that should be embraced is that the uproar seems not solely directed at the introduction of the development levy as a concept, but a clear demonstration of the widening trust gap between the government and residents. This has been reinforced by the unavailability of evidence to show that there was adequate and robust stakeholder’s involvement and engagement during the amendment of the tax law by the State government.

This is evident as the announcement came as a huge surprise to many stakeholders particularly the civil society networks that officially showed interest to participate in the entire process. This elicited flurry of germane questions such as: Why was there little or no public awareness on the amendment process despite being a State that has signed into the Open Government Partnership (OGP)? How comes an important amendment such as this got through the Kaduna state House of Assembly without subjecting it to public hearing?

It is more worrisome that the state government haven so far demonstrated commendable political will by strengthening the social protection system with the approval a policy, allocating 1% of the states internally generated revenue to social protection interventions and scaling up the state social register covering the 23 local government areas; without wide stakeholder’s engagement increased the development levy from N100 to N1000 mandatory for all adults.

According to the national social register for the poor and vulnerable households as at 30th September 2020, Kaduna state so far has captured 216,398 households made up of 825,805 individuals and still counting. Subjecting the adults in the households and many others yet to be captured to paying the development levy will be a case of giving with the right hand and taking back with the left. Has the government considered the effect of increasing the development levy on many teachers working in private schools who have not been paid since March, while the lucky ones got their salaries slashed.

Would this not be an unbearable burden on thousands of households whose income has plummeted due to their inability to engage in agricultural activities as a result of insecurity or ransom payment to rescue their kidnapped relatives. Have they not had enough? As fuel prices, cost of electricity, cost of transparency and inflation continues to skyrocket. Presently, Nigeria’s inflation rate rose by 15.75% (year-on-year) in December 2020 the highest since November 2017. The composite food index, a closely watched component, rose by 19.56% in December 2020, a three year high.

Notwithstanding, the above unpleasant picture painted, the law has been passed and there is very little or nothing to be done, unless the state government decides to humbly reconsider by going for another amendment. We await to see how the government will carry out the enforcement, get stakeholder’s buy-in, ensure equity in the utilization, and be transparent and accountable.

The government should ensure that the uncommon sacrifice they are demanding from the residents is worth it. Even though no one can deny that the state is witnessing mass urban road infrastructure development; however, equal attention should be given to rural development to boost our local economies for inclusive development.

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