Teaching Comparative Government and Politics

Tuesday, August 29, 2017

Red Tape and Politics

Americans complain liberally about bureaucracy and the procedures required by the rule of the "game" like they complain about taxes. Students of comparative politics should know that the bureaucratic rules in the USA and they taxes they pay are much less onerous than the rules and taxes in most other countries.

Definition of "Red Tape"

Tax Center Briefing Book

The high cost of red tape in Nigeria
MANY Nigerians may see building a hotel as an easy way to launder money. For legitimate entrepreneurs, however, running a hotel is far from cheap or simple. In Abuja, the capital, it is rather like erecting a sign that says: “Tax me”. In fact, erecting such a sign would result in city and local taxes of about 80,000 naira ($221) a year.

One Abuja hotelier recorded no fewer than 20 bills for various annual fees, taxes and licences. They range from a 5m-naira charge from the city council for having a car park, to demands from two different agencies for putting a logo on a company car. The hotelier has also been issued with bills for four different types of property tax and a bicycle/cart licence, despite having neither a bicycle nor a cart. Although he is challenging some of the notices in court, it is often safer to pay up and avoid facing the policemen that bureaucrats send to enforce payment on the spot. “It’s a racket …like in the mafia movies,” he says…

It is possible for the well-connected to pay bribes rather than taxes, says the Abuja hotelier. But those who do risk being presented with a backlog of bills if an election puts a new set of officials in charge…

There are a number of reasons for Nigeria’s impenetrable thicket of red tape. The first is the low price of oil, which once accounted for as much as 90% of government revenues. When less money is being doled out [by the national government] to state and local administrations, bureaucrats invent new charges.

The main reason, however, is Nigeria’s political system. The “patronage economy” encourages legislators to create ever more government agencies which they can use to provide jobs to pals, says Cheta Nwanze of SBM Intelligence, a research firm… One local newspaper found that the national parliament was in the process of creating 25 new federal agencies. Among them was a National Council for Research and Development, a National Research and Innovation Foundation, a National Research and Innovation Council and Federal Entrepreneurship Centres across the country. As if that were not enough, it is also creating a Chartered Institute for Entrepreneurs. Many will no doubt start issuing licences and permits to any firm in sight…

The result of all this regulation is that businesses stay small and, where possible, in the shadows. In 2013 the National Bureau of Statistics found that Nigeria has nearly 37m firms employing fewer than ten people (most of them unregistered sole traders). Just 4,670 employed 50-199 staff…

Reformers are trying to snip away at the tangle. Yemi Osinbajo, the vice-president, issued a series of executive orders in May in an effort to move Nigeria up a few notches on the World Bank’s ease of doing business index. It currently ranks 169th out of 190, putting it behind countries such as Iraq and Sudan…

In 2011 a report commissioned by the then-president, Goodluck Jonathan, recommended cutting the number of federal agencies from 263 to 161. Since then, however, the number has kept growing.

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Just The Facts! 2nd edition is a concise guide to concepts, terminology, and examples that will appear on May's exam.

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