The Federal government of Nigeria (FGN) has hinted that it would soon begin taxing the wealthy people for luxurious consumption in the country.
This disclosure was made by Nigeria’s minister of finance, Kemi Adeosun while addressing pressmen at the sideline of the annual meetings of the World Bank and International Monetary Fund (IMF) in Washington DC. Good idea, of course, but have we considered the cost of taxing rich Nigerians more?
According to here, “In any tax system, the burden must be borne by anybody whose income allows to bear it, so those with higher income should by definition, bear a greater part of the burden.”
“The rich are obligated to pay, and this has nothing to do with whether taxing the rich will increase public revenue or not.”
“The problem currently is that those at the lower level are the ones paying. If the man in the traffic control, with little income will pay at source, why should we not pursue the billionaire or the trillionaire to pay out of the income? We need to change the mindset in the country with regards to the tax system.”
Adeosun further explained that other West African countries are also considering implementing similar tax policy.
This policy might seem favourable to Nigeria, and help increase public revenue, but here’s the big question – Is it right? Do the rich deserve more taxes simply because they make more money?
Here is what I think are the pros of cons of such step:
Pros: Why The Rich Should Be Taxed More
- When economic times are tough, the government needs to look at ways of bringing in more money. Increasing taxes on the wealthy makes sense, as they are the ones who are most able to afford tax increases.
- A progressive tax system can prevent wealth discrepancies from getting too large. When the gap between rich and poor gets beyond a certain point, there is an increased risk of social instability and strife, such as crime and political turmoil.
- Taxing the rich can also be justified on moral grounds, if it is used as a form of wealth redistribution, with the tax money raised being used to aid the poorest sections of the population.
- Money is needed to pay for health, education, security, etc and it has to come from somewhere.
Cons: Why the Rich Should Not Pay More Tax
- Government already waste much of the money that they collect. If taxes are increased, all that will happen is that the government will just have more money to waste and there will be no incentive for them to spend efficiently.
- Raising taxes acts as a disincentive for individuals and businesses to make money. Some of the most talented people and businesses will leave the country and find somewhere with lower taxes, if they feel that their efforts are not being rewarded sufficiently.
- There is no public appetite for adopting higher taxes and the high taxation rates that were used in the past are now seen as a failure. High taxes in the past slowed the economy and lead towards stagnation.
- Cutting taxes for business has been shown on numerous occasions to actually increase overall revenue. Increasing taxes, on the other hand, just makes businesses alter their investment, spending and tax behaviors in order to find ways of cutting their tax expenditure, which generally leads to an overall decrease in revenue for the government.
- Higher taxes inevitably lead to a reduction in investment, as the people most likely to invest have their money supply hit. If there is less investment, then there are less businesses and unemployment increases. With more people out of work, there is less money being spent and the economy goes into a downward spiral.
- Increasing taxes for the wealthiest is socially divisive and encourages a class war situation where the poor and middle class begin to resent the rich, and the rich, who find themselves paying an increasing share of the tax bill, resent the poor and the middle class in return.
Should the rich be taxed more?
Drop your thoughts below.