CONTINUED FROM LAST WEEK
IN the face of these phenomena, three principles dictated themselves as deserving constant attention and application whatever the civil war’s duration. They are:
- to econornise our financial resources;
- to raise additional revenue; and
- to save our foreign exchange reserve from being run down to a dangerous level, thereby avoiding balance of payments difficulties, and preserving the strength of the Nigerian £.
In any situation similar to the one in which we found ourselves, where recurrent revenue trails behind fleet-footed expenditure, the obvious first line of attack is to economise, and maximise available resources. Unless this was done, and done with Draconic firmness, it would be futile to raise additional revenue; and any claim to prudent financial management would be sheer reference.
Throughout the war we did our very best to economise. Ministries, other than those of Defence and Internal Affairs, were enjoined to make 1 per cent savings in their approved estimates of expenditure for 1967/68; and, to their-credit, they made genuine efforts to comply. For the succeeding years, we endeavoured to keep all the Ministries concerned to the level of their 1967/68 appropriations minus 1 per cent thereof. At the same time, all capital projects, in respect of which the Federal Military Government had not irrevocably committed itself, were postponed indefinitely. As time went on, the Federal Military Government accepted firm and definite guidelines for observance by all its Ministries and Agencies.
For the duration, applications for additional expenditure were to be entertained only in respect of the following in the order in which I now state them:
- the conduct of the war including war publicity;
- assistance to States;
- agriculture; and
- roads.
Those who are familiar with such matters will readily agree, however, that guidelines and measures for economy are more easily laid down than enforced. But we did our best in the Federal Ministry of Finance to enforce compliance. And in this and other connections, our motto always was and still is: WOE UNTO YOU WHEN ALL MINISTRIES SHALL SPEAK IN PRAISE OF YOU.
At the outbreak of the civil war, the areas of fiscal and monetary operations open to us had diminished. We no longer had jurisdiction over individual income tax; internal revenue as well as foreign exchange earnings from petroleum and agricultural export products from the former Eastern Region had been far removed from our reach. But we strove to make the most of what remained, and explored new avenues for raising funds.
In the realm of direct taxation, the only victims left are incorporated companies. We had to approach them with circumspection, lest we kill the geese that laid the golden eggs. But we had no alternative but to make the geese produce as many more golden eggs as they could be safely made to lay.
We introduced capital gains tax at a modest rate of 20 per cent. We imposed terminal dues on all ships evacuating mineral oil from our ports. This is a new levy from which, when it comes into actual operation, we expect an annual revenue of £5 million. In our search for more revenue, we discovered that some companies, especially those engaged in oil distribution, were in the habit of declaring losses on their operations year in year out, in the face of huge trading turnovers, and in spite of the continuous competitive efforts among them to expand in different parts of the country. It is well known that oil motor tankers use our roads very heavily.
But we were astonished that their owners gave comparatively very little in return. It became necessary, therefore, to amend the Income Tax Decree to empower the Federal Board of Inland Revenue to impose Turnover Tax on the volume of trade of a company whether or not profits are recorded by that company for the year in question. Apart from bringing in some revenue, this innovation is bound to reduce the propensity to render a distorted account of profit and loss. The once-for-all-Ievy of tax on the profits of certain categories of pioneer companies, which brought in £ 1.2 million in 1968/69 was more in the nature of interest-free compulsory loan from the companies concerned than tax, since, in consideration of the amount thus paid by them, their tax holiday was extended by one year.
The super tax was introduced in order to raise more revenue from incorporated companies without undue hardship on marginal enterprises. If we raised the rate of companies income tax to 50 per cent, the marginal companies might go completely under, and our immediate object of raising more revenue might thereby be defeated.
CONTINUES NEXT WEEK