The Stranglehold of Multiple Taxation on Nigerian Businesses – In an era where the economic landscape is becoming increasingly challenging, multiple taxation stands as a significant impediment to businesses in Nigeria. For many companies and SMEs, the burden of navigating through the maze of taxes, levies, and fees has become almost unbearable. The issue isn’t just about paying taxes, but the sheer number and duplication of them, which has left many entrepreneurs crying foul.
The Tale of Bassey Christopher: A Symbol of Many
As Bassey Christopher approached retirement in 2012, the thought of establishing a steady source of income led him to set up a pure water business. By 2015, his venture had grown to include bottled water production. However, a few years later, the heavy shadow of bankruptcy loomed large, thanks to the multitude of taxes he had to remit to various government agencies.
Despite securing bank loans to keep his business afloat, a large chunk went into tax payments to agencies like the Federal Inland Revenue Service and Lagos State Internal Revenue Service. Christopher’s story mirrors that of many Nigerian entrepreneurs, who find themselves in a precarious financial situation due to exorbitant tax rates and overlaps.
The Duplicity of Taxation
Taxation is undeniably a civic duty and a crucial revenue source for any government. However, in Nigeria, there has been a rise in tax duplicity, where multiple levels of government impose the same tax under different names. This phenomenon has contributed to Nigeria’s poor standing on the global ease of doing business index.
Despite legislation like the Taxes and Levies (Approved Rate for Collection) Decree 1998, which aims to curtail illegal tax collection, the trend persists, causing significant strain on the business community.
The Real Impact on Businesses
A survey by PUNCH Investigations revealed that multiple taxes have either adversely affected or outright crippled many businesses in Lagos, a hub of economic activity in Nigeria. Even though taxation is vital for the running of government organs, the current system in places like Lagos has led to decreased returns on investments, eroded capital bases, and even the complete shutdown of businesses.
Telecommunication companies, in particular, bear a heavy brunt. Despite their significant contributions to the Nigerian economy, they face a barrage of taxes from various levels of government. Such challenges, coupled with other operational difficulties like infrastructural decay and foreign exchange shortages, have made the business environment increasingly hostile.
For SMEs, the situation is no different. The Chartered Institute of Taxation of Nigeria (CITN) pointed out that the majority of SMEs don’t survive beyond their fourth year, largely due to multiple taxation challenges. With SMEs contributing approximately 50% to Nigeria’s GDP and accounting for over 80% of employment, this is a concern that cannot be overlooked.
Seeking Solutions
There’s a growing consensus on the need to harmonise taxes. The Lagos Chamber of Commerce and Industry’s President, Benjamin Idahosa, emphasised that some taxes could be streamlined and channelled to a single agency. Such a move would reduce the complexity and ease the burden on businesses.
Moreover, efforts are underway to address the issue. The Lagos State Internal Revenue Service (LIRS) disclosed that it had signed a Memorandum of Understanding with the Federal Inland Revenue Service (FIRS) to tackle the menace of multiple taxes.
In Conclusion
The story of Bassey Christopher and countless other Nigerian entrepreneurs underscores the urgent need for tax reform. While taxation is crucial for governance, it shouldn’t stifle the very businesses that form the backbone of the economy. For Nigeria to truly thrive and foster an environment conducive for business growth, a comprehensive review and overhaul of its taxation system are imperative.