Tollgate: Regressive tax burden on motorists

The Minister of Works, Babatunde Fashola, announced plans for a return to toll plazas across the country last week, and the ministry has hurriedly tabled a proposal for its inclusion into the 2020 Appropriation Bill being considered for approval at the National Assembly this same week. Fashola had earlier made clear to the media, “There is no law that abolishes tolling in Nigeria today. We expect to return toll plazas.        We have concluded their designs, what they will look like, what materials they will be built with, and what new considerations must go into them”. The minister is right on the law, in the sense that the decision to scrap toll plazas was made through an Executive Order by former President Olusegun Obasanjo in 2004. An Executive Order, once made, can be overturned by another Executive Order without further ado. That, indeed, is the law, but since when did the minister conclude that public expenditure should be rammed through the national budget for no other reason but what he (the Executive branch) can do? Especially one that involves millions of road users, with considerable revenue and tax implications? Since when did the minister conclude that widespread public consultation be waved aside, over such a major roadwork plan, impacting the taxpayers on such a huge scale? What feasibility/viability study has the minister and his team conducted? What research has taken place? How many of the stakeholders have they communicated with? What cost-benefit analysis has been done? How about the environmental impact assessment? Impact on the poor? Questions, of course, that members of the Appropriation Committee of the National Assembly should not allow the minister to duck even this late in the day. That said, the rest of the discussion here will proceed on the assumption that the minister means well. While his intention is, by all account, honourable and beyond reproach on this issue, his tactic and approach however, are highly questionable. You cannot embark upon such a major reversal of policy by fiat. He has made no reference to any public consultation or input from stakeholders whatsoever. This appears to be just his own “brilliant” idea to generate funds for the country’s severely dilapidated and indeed dangerous road networks across the country. Almost 80% of Nigeria’s road network can be considered worn out, some are indeed death traps, full of potholes, cracks and creeks along the hedges. No point going too much into details; it is something everyone is familiar with. The reason for this is not just a lack of government investment in road infrastructure, it is also that the scale of the investment needed far exceeds anything government alone can shoulder at this point in time. There is also the important element of mismanagement and misappropriation of funds earmarked for roadwork happening routinely across the federation. So, why not embark upon a scheme, Public- Private-Partnership, to lure private investors with all types of juicy tax breaks, and allow them to put their own money into a project that will benefit them and the public at large, so the thinking goes. It is a no brainer, is it not? Any serious review of the scheme must start by examining the reason(s) for the abolition of toll plazas in the first place. They were abolished in 2004 because there was no economic case for their existence. What started as an American copycat scheme soon became entangled in fraud, incompetence and was generally burdensome. Not a single person bemoaned their abolition when it was announced. Now, before we rush through a reversal of policy, has the mischief involved in the original design been cured? Why is the minister trying to evade proper public scrutiny of his plan if indeed he is so confident of its merit? Why try goading the National Assembly to rubber stamp a scheme steamrollered through a committee in a last-minute attempt? If approved, the minister would be rightly applauded for being smart, and on the ball, of course. But, it is not certain what the members of the Appropriation Committee would be credited for though. Dereliction of duty, maybe? Tolling roads is not the magic bullet that some people think it is. It may be progressive, regressive or neutral depending on the social demographics of the area being targeted, as well as the structure of the tolling regime itself. Road toll in high-income communities, such as the Lekki-Ikoyi Link Bridge, in Lagos, for instance, is progressive as it mainly affects high income motorists, who generally value time more than the increased cost of travelling. If you install toll plazas in densely populated areas, where the poor would have no choice of routes, as is currently being planned, then, the tax (or toll) becomes essentially regressive because the poor will lose out in absolute terms. The loss is only ameliorated if the revenue generated from it is ploughed back into construction and maintenance, creating job opportunities for workers. It is not clear from the minister’s point of view, how this calculation has been made.


Source: Punch