ActionAid is a global movement of people working together to further human rights and defeat poverty for all.

A Driving Force Behind Poverty and Corruption

Being a taxi driver in Nigeria is far from a lucrative business. Each day, taxi drivers like Emmanuel* have to pay five thousand naira ($25USD) to the owner of the car, cover the cost of fuel, pay the car loaders at motor parks, and often distribute a bribe or two to the police. At the end of the day, the profit is small. And yet the expenses do not stop here. There are also the taxes.

Emmanuel plies Abuja’s busy AYA route in his taxi every day alongside hundreds of other marked and unmarked taxis. To use the AYA motor park he and the other taxis drivers pay a daily tax of 250 naira and then another 50 naira for each time they load their taxi at the park. In the course of a week, Emmanuel pays thousands in tax. In the course of a year he pays well over 100,000 naira ($500 USD). These taxes significantly impact his already insufficient profit margin, yet in comparison to what he regularly pays in tax to the Joint Task Force (JTF), the amount is small.

Setup along the AYA route, the JTF, made up of military and paramilitary personnel, detain non-registered taxis, collecting anywhere from ten to thirty thousand naira in taxes from the drivers. Even when paid at the Mabushi Vehicle Inspection Office, no receipt is ever given, meaning that no taxi driver is able to prove he has already paid his fair share of taxes for the given period. As such, drivers are repeatedly hassled for money by the Joint Task Force whose own salary payments are often severely delayed by the government that employs them.

The paying of taxes is a normal part of business. Across the globe, governments use taxes to pay for public services and infrastructure projects, like roads and schools. And yet the roads Emmanuel drives are dangerously full of potholes and unlit, and the schools his children should attend are poorly equipped and charge various fees. Fees that Emmanuel cannot afford - ironically due to the amount of tax he pays.  As a result, a number of his children are currently out of school. 

The even greater irony is that across Nigeria, and indeed much of Africa, poor citizens like Emmanuel pay more in taxes than multi-million dollar foreign companies. In Ghana, for example, SABMiller did not pay corporate tax for three years between 2005 and 2010. The Associated British Food group (ABF) in Zambia has also admitted to paying “virtually no corporate tax”, thereby depriving Zambian public services of an estimated US$27million, according to an ActionAid study. In Nigeria, an estimated average of 15 billion dollars is lost to illicit financial flows each year, of which most is as a result of harmful tax practices. If this lost revenue was kept in the country and directed towards public services, Emmanuel’s children – and indeed all the 10.5 million out-of-school children in Nigeria – could claim their basic human right to education.

The blame, however, cannot be placed solely on the foreign companies. While these companies’ tax avoidance practices may be immoral, they are not illegal. In fact, tax breaks and other harmful tax practices are willing offered up by the Nigerian government. The belief is that low tax rates, tax exemptions, and treaties that permit money to be channeled through tax havens will attract more foreign investment into the country which will in turn lead to job creation. Unfortunately, this belief has no firm basis. Numerous studies have shown that foreign companies rate tax breaks as very low on the scale of motivation for investing in a country. In yet another tragic stroke of irony, what these companies rank as high motivators for investment are a skilled/educated work force and strong infrastructure – the very services that tax is supposed to finance.

Emmanuel is frustrated that he pays taxes while many multinational companies do not. He believes that if the Nigerian government made multinational companies pay their fair share of tax, not only would public services improve, but corruption would decrease. With the additional revenue, he says, the government would have enough money to pay the salaries of military and paramilitary agents, who often go unpaid, and then they would not be compelled to extort money from poor taxi drivers like him.

There is hope that Emmanuel’s wish could come true. After extensive advocacy efforts by ActionAid and other civil society organizations around the world, the African Union finally accepted a high panel report with recommendations on illicit financial flows in late January 2015. It is a significant step in the right direction, but there is much more work to be done to ensure the effective application and implementation of the recommendations by the Nigerian government and other governments across the continent.

ActionAid, through its international Tax Power campaign, remains committed to holding the government to account and ensuring that the outflow of money from the continent is not only stopped, but re-invested into health, education and infrastructure projects. Such projects will not only boost the development of the countries, it will also assist in improving the lives of Emmanuel, his children and the millions of others unjustly living in poverty.

*Name changed upon request