The executive chairman of Kaduna State Internal Revenue Service (KADIRS), Dr. Zaid Abubakar, opened a floodgate of criticisms when he announced that the state government will collect N1, 000 Development Levy as from next year. In this interaction with newsmen, Dr. Abubakar explains why.
Last week, Kaduna Internal Revenue Service (KADIRS) announced that the state government will commence charging of Development Levy as from next year. The announcement was rather vague. Are there some categories of residents that are exempted from that law?
Thank you for that question but let me start by adjusting the question. You said we are going to commence the collection of Development Levy in 2021; this is a law that has been in existence for years. It is an octogenarian tax head that has been there for over 80 years and before now Kaduna state has been collecting it but the rate has been very ridiculous. We collect only N100 per head and per annum. So, what we said in the last press briefing is that, we have assessed the level of compliance and it is very deficient. What we intend to do in 2021 is to ensure effectiveness in the collection and that is what I said. The new amount to be paid based on the reviewed Kaduna State Codification and Consolidation Law is N1000. For those that are interested in fact-checking what the law says, they can go to Part 1, Schedule 1, item Number 10 of Kaduna State Codification and Consolidation Law; it is clearly stated there.
Are those residents who are charged Pay As You Earn (PAYE) tax expected to still pay this Development Levy?
Yes, they are going to pay the Development Levy; as the name implies, it is a different revenue line. If you go to taxes approved in the list of collection as from 2015, you can see the categorization of what the state, local governments and federal government are entitled to collect. So, in that particular list, we have Personal Income tax as a separate item, we also have Economic Development Levy as a separate item. We have other types of taxes like Capital Gain Tax. All these are separate tax lines which are applicable, depending on the kind of business activity one engages in. So, whether you pay Personal Income tax or not, Economic Development Levy is compulsory on all residents of Kaduna state by virtue of the law.
So you mean even high net worth individuals who pay Income Tax will also pay the N1, 000 Development Levy?
Of course, they will pay the N1, 000. To them, N1, 000 is insignificant. The loudest outcry is from the downtrodden at the grassroots, but if you divide N1, 000 by 12 months, it is just N83.3. So, if you are to pay monthly, it is just N83.
What of residents who are unemployed, are they also expected to pay the N1, 000 Development Levy?
Well, let me make a clarification here; the rationale for this Economic Development Levy is actually to motivate and incentivise the residents to be entrepreneurial, meaning that they can’t afford to stay idle in Kaduna state. If you are asked to pay N1, 000 and you don’t have anything doing, it means you have to look for something to do in order to have an income that will enable you pay the Development Levy.
Government is supposed to either create jobs or the enabling environment for people to engage in businesses. Will you say that Kaduna state has fulfilled this Social Contract that will enable people to pay the Development Levy and other taxes?
Well, as a tax man and a tax administrator, I can tell you that one of the objectives of taxation coming from canons of taxation is to redistribute income. We ensure that what we collect is actually redistributed within the economy and it is only through that that government will be able to provide job opportunities. Of course, government cannot employ everybody , the only thing government can do is to provide job opportunities for its residents and I can assure you, by the time we are done with our strategy, that is the 2021 revenue strategy, we will come up with revenue collection plan that will also provide within it, job opportunities for the public. So, while we are trying to collect Economic Development Levy, we are also looking at other revenue heads that will provide job opportunities for the residents of Kaduna state. So, it is a two-faced project. Now, the new concept we have in the revenue administration is to ensure that we have a business mindset in the collection of revenue.
What I mean by business mindset is that, while we are trying to collect tax from the public, we also have to incentivise, especially in providing job opportunities in certain collection areas, which will allow the teeming youth to have an opportunity to also contribute to revenue generation. And while doing that, they will also earn an income for themselves.
Given the fact that we are just coming out from the lockdown, as a result of the Covid-19 pandemic which has taken a toll on businesses and personal incomes, don’t you think that the Development Tax is being introduced at the wrong time?
Well, as I said initially, it is not an introduction of new tax; it is a continuation of effective collection. As you may be aware, during the period of lockdown, starting from March, 2020 up to around September 2020, the government, in its wisdom, granted what we called tax waivers or amnesty to a very good number of tax payers within the state. They have actually enjoyed that tax waiver and that is why we said we are not going to launch this effective collection of the Economic Development Levy until 2021. So, that will allow additional breathing space for the residents before we begin to put our machinery in place by 2021.
Seeing that this tax involves everybody, does KADIRS have the effective manpower of collecting this N1, 000?
Well, we have fine tuned the entire collection model; we have come up with a model that will ensure effective collection. Of course, we do not have the manpower to spread across all the nooks and crannies of Kaduna state. But in trying to achieve this effectiveness, we have come up with a model and the time is not ripe for me to disclose the model now. May be after our strategy session around December, just on the eve of 2021, we are going to call another press briefing to sensitise and also to educate the public on how the collection model will operate.
The elite who operate bank accounts can easily pay the Development Levy, but when we talk of people down the ladder who have never seen a bank before, how will their payment model look like?
You know financial inclusion has been an issue and that is why in the model aspect of the collection, we factored in the financial exclusion of a very good number of the public. So, what we intend to do is to actually use our model which will be revealed by December, 2020 in which we factored in these loopholes of financial inclusion/exclusion of the state.
What will be the sanctions for those who default in paying the Development Levy?
Well, for Economic Development Levy, there is no specific sanction; the only sanction is if you look at the general provision of the law, defaulters can be prosecuted in the court of law.
Will defaulters, for example, be shut out from accessing social services like public hospitals or schools?
Of course, that is part of the sanctions, but that is a policy issue and not coming from the law. But what I said initially is coming directly from the law, failure to pay will mandate us taking a defaulter to court of law for prosecution but when it comes to access to other public social services, that could be a larger policy issue.Attachments area
