By Merit Ibe ibe.merit@yahoo.com
The Organised Private Sector (OPS), has decried imposition of multiple taxes crippling businesses.
Worried by the torrents of taxes , the sector is pleading with President Muhammadu Buhari not to leave a legacy of unbearable tax burden for investors in the Nigerian economy.
Increased taxation in whatever form is counterproductive, retard the contribution of the manufacturing sector to the GDP and cause a great setback on the ability of the real sector to support the poverty reduction/alleviation and job creation aspirations of President Buhari’s administration.
They rather proffered expanding the tax net, citing concerns for increased tension in a struggling business environment with multiple taxation.
Manufacturers have confirmed issues of multiple and duplication of regulation, which often find expression in the excessive drive for tax revenue instead of widening the tax net; unfriendly tax practices of government agencies, which are seriously impeding businesses.
A survey by the Manufacturers Association of Nigeria (MAN) has shown that local manufacturers are paying over 30 different taxes, levies and fees to agencies of the Federal, state and local governments on account of increased revenue target.
Consequently, these multiple taxes and levies according to MAN’s survey have severely depressed production in the country’s manufacturing sector.
According to the report, many manufacturers operating in the country’s industrial sector are groaning under growing multiple levies being charged by government agencies.
Citing the new finance bill recently passed by the National Assembly for the president’s accent, Director, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said the Bill contained the following provisions, among others:
Imposition of excise duties on all services with rates to be determined by a presidential order. Imposition of 0.5 per cent tax on all eligible imports from non-African countries to fund Nigeria obligations to international organizations; An increase in Tertiary Education Tax from 2.5 per cent to 3 per cent of company profit;
Dr Yusuf averred that all of these have far-reaching implications for investors and citizens.
“It will affect the cost of production; affect operating cost and would undermine investors’ confidence. It has profound inflationary implications. It will effectively move corporate tax to almost 35 per cent which is one of the highest globally.”
He said currently, corporate tax is 30 per cent; Tertiary education tax of 2.5 per cent; NITDA tax of 1 per cent; NASENI Levy of 0.25 per cent; Police Trust Fund tax 0.005 per cent. Meanwhile, the National Assembly has already passed a bill imposing 1 per cent tax for NYSC fund [awaiting the assent of the president] and another 1 per cent Tertiary Health Levy is being planned.
“In the meantime, investors are grappling with macroeconomic headwinds including depreciating exchange rate, illiquidity in the official forex window, spiking energy cost, weak purchasing power, rising interest rate and surging inflation, among others
“Companies currently pay multitude of taxes, fees, levies to state governments, local governments and regulatory agencies.
“This is not the way to promote economic recovery, job creation and poverty alleviation. Already, 133 million citizens are in extreme poverty. These measures would further impoverish the citizens as these additional taxes would be ultimately borne by them.
“We appeal to President Buhari not to leave a legacy of unbearable tax burden for investors in the Nigerian economy.”
He stated that manufacturing companies and indeed most investors are going through tremendous stress at the moment.
“Businesses are currently grappling with structural constraints impacting capacity utilisation, productivity and competitive, which are affecting sales, turnover, profitability, shareholder value and the sustainability of investments.
“The private sector has increasingly become the target for regulatory agencies seeking to raise revenue for government deficit, which continue to take a toll on the private sector competitiveness.
High tax burden on businesses is detrimental to investment and job creation and could ultimately undermine revenue generation prospects of government.
Yusuf recommended that revenue drive should rather focus on efficiency, effectiveness and equity as major policy objectives of taxation.
President of the Lagos Chamber of Commerce and Industry (LCCI), Dr Michael Olawale-Cole advised the Federal Government to focus its attention on other areas to raise funds to implement the budget rather than over-burdening the private sector with additional taxes.
“The Federal Government should look at other areas of raising funds to implement the budget and of course tax is a must for everyone, but at the same time, we should not put too much pressure on the private sector in the area of raising revenue. We are appealing that the federal government should expand the tax net as against putting pressure on the very compliant taxpayers.”
The Director-General of MAN, Segun Ajayi-Kadir explained that there is the need to streamline the observed multiplicity of taxes and ensure that only approved taxes/levies/fees are charged by these agencies of government.
The MAN director-general added that government should begin to consider reducing the various tax rates which have been the global order in recent times to encourage investment.
He advised that it is expedient that government harmonised the operations, regulatory checklists and mandate agencies of government at all levels to promote more friendly operating environment, noting that levies being paid to the agencies are taking huge toll on operations.
“I think it is a good policy if the government can streamline these agencies. It will be good to see one-stop shop agencies for the SMEs and manufacturing sector in Nigeria, because right now, this multiple taxation is obviously affecting most of our members. You know they have to take care of so many bills like security, light and other things. When one agency comes with a levy and before you finish with that one, another one comes, it’s quite discouraging.
“With low and worsening disposable income, heightening insecurity and anxiety, caution is the word. What could be within reasonable contemplation should be widening the tax net to capture the largely untaxed endeavours that ought to have been within the tax bracket.
“I’m of the opinion that the net should be expanded to capture those and are not captured and not existing legitimate and diligent taxpayers would be made to pay more or that additional taxes would be levied upon them. That will be counterproductive and the envisaged additional revenue may not be realised. Instead, we may start to witness dwindling profitability, higher rate of business failure and a predisposition to tax evasion. This is not to mention the disincentive to local and foreign investment.”
President of NACCIMA, John Udeagbala, suggested an increased tax base over increased taxes and leveraging investments through public-private-partnerships in exchange for tax credits spread over time, noting that it is now generally accepted that the current levels of debt service payments are considerably high and unsustainable given dwindling government’s revenues.
Udeagbala said over taxation is driving away foreign investors and when businesses are over burdened with multiple taxes they collapse.
“We pay for security, light we don’t even get, infrastructure; fuel diesel prices keep going up. It does not make economic sense to add further burden on businesses.
“The private sector is doing 99 percent, what is government doing order than increasing tax and nothing to show for it.
Solution is not additional tax but to increase the tax base and make our companies and businesses competitive.
Udeagbala queried why most of our governor’s travel out of the country to source for foreign direct investment, abandoning our local investors.
“The NIPC gets foreign investors and gives them all sorts of tax holiday but local investors are abandoned and over burdened with multiple taxes; that is not fair.
“The private sector keeps engaging government in the ease of doing business to expand and get more revenue. If we continue to operate below par, the tax issues will continue to be daunting and the ratios will be increasing if we don’t increase the tax base.