Burden of multiple taxes

With a huge burden of multiple-taxation, Nigeria may not be able to keep its investors and entrepreneurs. This view was recently expressed by Chairman of Heirs Holdings and Founder, Tony Elumelu Foundation (TEF), Tony O. Elumelu while presenting a keynote address at the 21st Annual Tax Conference of the Chartered Institute of Taxation of Nigeria, CITN. Besides calling for comprehensive tax reforms in the country, he also urged the National Assembly to urgently pass the Executive Tax Bill into law.

Elumelu said the average business owner in Nigeria is a local government authority on his own because he caters for his own electricity with generators, builds his own borehole and handles his own waste disposal. He decried the plight of SMEs who are at the mercy of the tax system, saying, “The average number of taxes businesses pay in Nigeria is 48, compared to 33 in other sub-Saharan countries. In Hong Kong, it’s just three. Multiple taxes remain a significant burden for SMEs and corporates operating in the country.”

The billionaire businessman opined that until there is a reduction in what SMEs pay as tax, elimination of multiple taxes, abolition of minimum income tax, and excess dividend tax, it will be difficult for us to expand the tax base. “It will be difficult for us to attract investors into this country, and it will be difficult for us to retain the ones already in the country. It will be difficult for us to mobilise our SMEs to help create employment that we need so much in this country,” Elumelu said. Government, according to him, can make businesses thrive better by creating favourable tax policies that support SMEs.

Tony Elumelu equally tasked government to increase the number of double tax treaties between host countries and Nigeria. He said Nigeria has 14 taxation treaties while South Africa has 79 double taxation treaties, and yet we are the largest economy in Africa. Our embassies should adopt a target in the next two years to sign tax treaties with our top 100 trading partners in the world, he said.

Tax is disreputable in Nigeria’s eyes because government failed to justify its payment. Too many individuals and companies here evade tax. Elumelu said, “With a population of close to 200 million people in Nigeria, we have only 75,000 registered SMEs in the country. No one needs to tell us that people are avoiding tax or refusing to be a part of the system”.

It is lamentable that huge revenues which over the years accrued to government from the oil sector gradually destroyed Nigeria’s tax culture. Elumelu suggests that an increase in the tax to GDP ratio from its current six percent to sixteen percent will amount to an additional $40 billion in government revenue, which is similar to the size of the nation’s foreign reserves.

Although the Joint Tax Board (JTB) introduced Taxpayers’ Identification Number (TIN) to address multiplicity of taxes and also to help bring more taxpayers into the tax net, multiple taxation still exists in the system. This is even as the Executive Chairman, Federal Inland Revenue Service (FIRS), Mr Babatunde Fowler, said in February this year during a session in Lagos with Manufacturers Association of Nigeria (MAN) that multiple-taxation does not exist in Nigeria. An average of 48 taxes paid by a business in Nigeria is not an indication that any regime for the harmonization of taxes is in place.

Ghana recently reviewed its tax policies in order to curb multiple-taxation, attract investors and make the business environment friendly to SMEs. It is time Nigeria undertakes such a measure not only to forestall investors’ exodus to neighbouring countries but also to ensure the survival of our SMEs. While we urge government to employ smart tax incentives to attract and incentivise local and foreign investors, we also encourage it to put in place tax systems supportive of SMEs because they are ‘the engine for job creation in the economy.’

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