CORRUPTION IS REGRESSIVE TAXATION
CORRUPTION
The Merriam Webster’s collegiate dictionary of English Language says the word

The word corruption originated from the Latin word rumpere meaning to break. This means that something is broken such a law or ethic, protocol or code of conduct.

The World Bank and IMF see corruption as the abuse of public office for private gains. Osoba (1996) defines corruption as an antisocial behavior conferring improper benefits contrary to legal norms and normal norms and which undermines the authorities capacity to secure the welfare of the citizens.

Finally Todaro and Smith (2009) sees corruption as the abuse of public trust for private gain. Corruption is a global issue which is endemic to most governments of the world.
It is the biggest obstacle to development. According to Tanzi (1998) corruption is the intentional noncompliance with arms length relationship aimed at deriving some advantage from this behavior for oneself or for related individuals.

However, not all act of corruption culminate into bribe taking. For example not reporting to duty for which you receive monthly salary for is an act of corruption, because you are committing economic sabotage by not giving commensurate value for your salary. A governor or president who diverts projects meant for the equal development of all regions to his town or village is an act of corruption that doesn’t involve taking or giving a bribe.

Therefore corruption has no universally accepted definition; this is because corruption depends on the actors, and the location where it was carried out. It also depends on the enabling law which may give room for twisting or circumventing. Some nation’s description of corruption is broader than others. For example while most nations characterize embezzlement of public funds as corruption, Nigeria under President Goodluck Jonathan simply calls it stealing.

Be that as it may, corruption, no matter the cloak it wears is a danger to the economic growth of a nation.
In Nigeria, corruption is described under the following terms * Bribery * Extortion * Embezzlement of public funds * Betrayal of trust * Nepotism and tribalism * Unfair advantage * Financial malpractice * Examination malpractice * Egunje, dash or gratification * Mobilization fee * Requesting for upfront percentage of contract awarded * And 419 * Abuse of electricity installation such as the prepaid meter and high tension wires. * Late or non-coming to work. * Illegal oil bunkering.

Corruption was legitimized in Nigeria around 1985-1998. During this period there was the settlement syndrome was born, this era featured high and wasteful spending with nothing to show for it development-wise.
Once Nigerians tasted the forbidden fruit of corruption there was no going back. Younger generation of Nigerians now aspire for public offices with the aim of sharing in the national cake as was done by our older leaders.

Subsequent regimes have paid mere lip service to the eradication of corruption in Nigeria; this is seen in late Prof. Dora Akunyilis mantra- Nigeria good people great nation. Corruption has created an illegal and unequal distribution of income, such that majority of Nigerians are poor while a small minority control the national wealth and economy.

According to the World Bank, the top ten percent of income earners account for 38 % of the country’s wealth in 2010- a rise from 32% in 2004. More than 80% of Nigerians live on less than two dollars per day despite the country’s huge income generation from the sale of crude oil. According to the Nigerian Extractive Industries and Transparency Initiative (NEITI) topped 43 billion dollars in 2007.

Therefore, corruption acts as a regressive tax on the poor. Studies conducted by Transparency International reflect the fact that poor people pay more as a percentage of their income than the wealthy, but this will be treated in depth under regressive taxation.

WHAT IS REGRESSIVE TAXATION?

This is a form of tax that is equally applied to all people irrespective of their income or earning power. Therefore, because it is administered to all citizens equally it affects lower income earners more adversely than their wealthier compatriots. Example is the Value Added Tax and the Fifty naira stamp tax on all current account holders who are charged fifty naira for every one thousand naira transaction.

This can be explained in this manner- if a nation institutes 5% sales tax on groceries, this means that everyone who purchases groceries must pay 5% extra on the price of the item. Now, the problem with this is that since the lower and middle classes earn less money than the high class or wealthy, that extra 5% tax is hard for the poor and middle class to pay. Consequently, regressive taxes are not popular among the poor and middle class than the wealthy. Another illustration can be seen in the 50 naira stamp duty or tax on every 1,000 naira transaction. In this we observe that this tax is implemented across board, not minding the fact that both the very wealthy to whom the amount is insignificant and the very poor whom a tax of 50 naira on their 1000 naira is extremely heavy and suffocating. This is simply taking from the poor who do not control or have any stake in the means of production and the economy and transferring these funds to the wealthy and the industrialists who are in a better position to access all that the nation has to offer. This boils down to the rich becoming richer, while the poor stays poorer by contributing to the wealth of the rich people, this is corruption at its finest.

However, most people are of the opinion that regressive taxation is fair because unlike progressive taxation which collects larger tax on higher income earners, regressive taxation doesn’t punish successful individuals, it actually means that the more successful you become a lower percentage of your income goes to tax.
It’s a tax that rate that declines as the amount to be taxed increases. In terms of income, federal and state tax on alcohol is regressive because people of low income pay a higher percentage of that income to purchase alcoholic beverages unlike those that earn high wages whom have to pay the same amount for the alcoholic drinks which incidentally reflects an insignificant part of their income, because of the size of their income.

Regressive taxation also frees up more capital for investment, because high income earners save a greater portion of their income courtesy of this form of taxation.
But because it taxes everyone equally, it is socially and politically unacceptable, a very rarely exploited form of taxation. Its unacceptability is more pronounced in a state like Nigeria which characterized by unequal income distribution, unfair labor practices and low minimum wage.

Furthermore, its proponents feel it’s the best because it is simpler and doesn’t support all forms of waivers and tax holidays which are normally extended to the wealthy in the society.
Buts its opponents posit that middle income taxpayers are left with a large proportion of the tax to bear.

REGRESSIVE TAXATION AS CORRUPTION.
We will concentrate on the new federal Government of Nigeria stamp duty because it is a good example of regressive taxation which punishes the average poor man in Nigeria. For electronic transactions above one thousand Nigerian naira into any account except savings a tax of 50 naira is paid by the beneficiary.

This is a tax on the poor people of this country whom will suffer the most from this tax. This tax which says that 50 naira must be paid for any transaction above 1000 naira is both corrupt and exploitative in the sense that both the rich who can transact a business of millions and the poor who may get only 1000 into his account are required to pay the same 50 naira tax. Therefore, what this does is that the poor man pays a higher percentage of the tax relative to the inflow while the rich man goes away with a tax that is almost insignificant to his income.

Furthermore and as a consequence of this tax, public and private companies that generate revenue, e.g. hospitals, laboratories, government establishments etc now enforce a 50 naira stamp duty on any transaction executed in their establishment on all customers. In the final analysis we observe that these companies are making money as a by-product of their corrupt exploitation of poor Nigerians.

So we see that the new stamp duty is poorly structured and may end up damaging the economy the more.

This is because, while the APC- Federal Government is focused on the financial benefits which (66.1 billion naira expected to be realized from the stamp duty tax) she will get from the tax, she has largely ignored the detrimental effect it will exert on the lives of ordinary Nigerians who are groaning under the impact of receding income from petroleum products, inflationary pressure and the beginning stages of an economic recession.

For further clarity, let’s say you get a deposit of 100000 and get charged 50 naira as stamp duty and another person receives 1000 and pays the same 50 naira stamp duty, the amount taxed and calculated in percentage is significantly larger for the person who has 1000 than the one who has 100000. This essentially means that people receiving lower deposits (lower class) will be taxed a higher percentage.
This type of taxation is detrimental because of its lopsidedness and also because the upper class are really responsible for the economic recession in the first place and not the poor who have minimal impact in the scheme of things.

In conclusion, let me point out that stamp duties tax are originally meant for physical documents. Today its used globally for stocks, real estate etc. its rarely used for everyday transactions such what is going now in Nigeria.
Its primarily levied on the middle and upper classes but has a limit to protect lower income earners, for example, in the UK first time buyers of properties under 250,000 gbp enjoy a stamp duty waiver for two years, in Ireland the transfer of stock and marketable securities is taxed 1% if over 1000 Euros. But here in Nigeria we tax as low as 3.33 usd to 4usd for daily transactions.

All this is going in the wake of FGNs aspiration to turn Nigeria cashless which is about to be scuttled with the imposition of stamp duties. This is because the average Nigerian mentality will devise a means to evade payment of the stamp duty by nothing making any deposits into a current account, but rather use savings account which will not be taxed or instead just prefer to receive money in cash.

Furthermore, because we are an economy sliding into recession and we believe that the only way to come out is to spend more, and also knowing the obvious that people wanting to evade stamp duty payment will turn to their savings account thus making it more beneficial to save than to spend, which will further draw the economy deeper into the muddy waters of recession. When this occurs the CBN will have no choice than to impose further restrictions on savings account holders and we will keep on going on and on into poverty, corrupt practices, and underdevelopment.

CONCLUSION
Finally, this stamp duty is a poor way of generating revenue for government business. This is because it tends to impoverish and punish the very people it swore to serve and protect. In her bid to generate money to fulfill its election promises the APC government has resorted to arm twisting tactics to illegally extort money from struggling Nigerians so as to continue to remain relevant. I see this as corruption, because it targets the poor and defenseless, it brings about stunted growth in the economy, it goes against the basic role and responsibility of government to her citizens, it pushes the people into innovating corrupt ways of circumventing the imposition and it further draws the nation into recession.

This situation is further saddening when we juxtapose government responsibility to the people with the people’s obligation to the government. The people who have decided to forgo their individual wills to the government should be treated in a more transparent and humane manner and should not be made to pay for the actions of a few rich and powerful members of the society, because like I mentioned earlier, this mess we have found ourselves was not caused by the working class of Nigeria but by the owners and controllers of the means of production, who should be called to take responsibility for taking us out of this recession.

This has to be done by government as the ones who lay down the ground work for business as part of its role in defining the operating system. If not done we stand the further threat of further losing FDI because most investors will rather come into a stable economy than one which stands the risk of recession.

Therefore I think the CBN should reverse all forms of regressive taxation currently in place and institute progressive taxes which will target higher income earners.

REFERNCE

1. http//.cenbank.org/out/2016/ccd/scan0001.pdf

2. Abed GT Davodi HR (2002). Corruption, Structural Reforms and Economic Performance in the Transition Economies. Washington DC: International Monetary Fund.

3. Akinlabi A, Babatunde H, Awoniyi M (2011). Corruption, foreign direct investment and economic growth in Nigeria: An empirical investigation. J. Res. Intl. Bus. Manage. 1(9): 278-292.

4. Dzumashev R (2009). Is There a Direct Effect of Corruption on Growth? Munich personal REPEC Archive. MPRA Paper No 18489. Pp 1-16. Retrieved March 8 2016 from http://mpra.ub.unimuenchen.de/18489/

5. Hainey Raymond (January 10, 2013 8:10 pm ). Corruption seen as regressive tax, home news businesssportslife.com

6. World Bank (2001). The Nigeria Governance and Corruption Survey Report 2001 www.accountabilitynigeria.org