Your tax, your child and the future

Nigeria is our motherland, but most Nigerians would have disowned their biological mothers if she did the same thing this country has been doing to her citizens. Although the government budgets a lot of money on infrastructure, health, education, security, etc., lack of maintenance culture and corruption have hindered the people from benefiting directly from it. There is therefore a real need for the government to come up with policies that will be of benefit to majority of the people.

Most countries have a social security scheme aimed at a class of people. In some countries it is for the unemployed, some is for the retired, disabled, etc. The Nigeria government has begun a monthly payment of N5000 (about $10) to some people that are regarded as vulnerable. Inasmuch as the idea is laudable, but by world standards, it is an embarrassment. The World Bank poverty line is $1.9 a day, which means that the government strategy will keep the people in poverty and not take them out of it.

While I understand the cost implication of having a social security scheme, what matters most is the strategy and the impact of such a scheme on the people and the Nigerian economy. It is also noteworthy that citizens also have a role to play other than being a critic of the government, which is the reason why I developed a social security strategy where both the government and citizens have a part to play. The scheme was developed using Lagos state as a model and it is channeled towards having an ‘unemployment trust fund’ for people who are 21 years and above, unemployed and born in Lagos state.

HOW IT WORKS/CRITERIA

The Lagos state government will put a certain amount in a trust fund for every child born in the state which will the payable if the child in unemployed and is 21year or above provided the following criterion are met

  • The parent of such a child must be a constant tax payer in Lagos
  • Money can only be received when or if the child is unemployed
  • In a case of loss of job, then the citizen must have been paying taxes to the Lagos state government when working to be able to benefit

PUTTING IN THE NUMBERS

  • According to LIRS, 5milion people are tax compliant in Lagos state as at 2016
  • According to the Lagos state government, 3.5million people are evading tax in the state.
  • The world economic forum puts Lagos state as the fastest growing economy in the world with 85 people born every hour. I.e. 2040 per day, 744,600 per year.

Using the numbers above, let us assume that the scheme starts this year and the government wants every child born in this country to get N2m when they are 21 years, then we have to calculate the present value of the sum assured today. Using 10% as rate, the government will be paying N270,270 on every child born in the state. Lets assume that all 58% of taxpayers give birth this year, that means the government will set up the trust fund for 431,868 kids, which puts the total amount for the scheme for year 2017 at N116,720,964,360. It is however noteworthy that it is not possible that all tax payers give birth in the same year which means the amount needed will be way less. The question now is how will this be financed?

HOW IT COULD BE FINANCED

The 2017 budget for Lagos state is put at 812.998bn and although a breakdown was not provided, the House of Assembly has passed the budget. A proper breakdown would have given us proper information to know how the revenue can be managed to cover this scheme. However, Lagos state generated 268bn in 2016 and this excludes monthly allocation they get from the federal government. It is however not a question of if the government can afford it but if they are willing to make provision for the scheme.

BENEFITS OF THE SCHEME

  • Encourage more people to pay tax
  • Long term solution to unemployment problems
  • It will boost the economic strength of the state.

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