Economy, Featured
While Nigerians groan daily over multiple and excessive taxes and poor governance issues, it may be necessary to evolve ways of branding the political parties to reflect their true character – such as the party of “excessive taxes”, “of corruption promoters and of “Worst Human Rights Records. Perhaps, this categorization may assist the voters to make informed decisions during elections and perhaps check the excesses of the parties.
By Goddy Ikeh
DESPITE the popular views of some schools of thought that taxes don’t grow economies and that tax hikes create endless cycle of debts. They are of the view of the negative consequences, especially in Nigeria and other African nations where low wages and oppressive taxes prevail, while high inflation and unemployment are unfortunately the result of such avoidable tax policies.
In his view on the issue of taxation to grow any economy, Winston Churchill, a former British Prime Minister (1940–45, 1951–55) said: “For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” And for these schools of thought, the solution lies in tax cuts.
But unfortunately, some Nigerian leaders, officials and their foreign cohorts in a number of financial institutions at home and abroad believe in excessive taxation and impoverishing Nigerians to the extent that they are helpless and will be easily manipulated to achieve the goals of the political leaders.
Apart from the raging war which the Organised Labour has been waging against the anti-people policies of the federal government, including multiple taxations being imposed daily on Nigerians, many stakeholders and eminent Nigerians have added their voices to the protests. For instance, manufacturers, who are members of the Manufacturers Association of Nigeria, MAN, have been lamenting over 30 taxes that are choking industries in the country and raising alarm that the federal government is gearing up to introduce more taxes.
According to the manufacturers, the multiplicity of taxes, levies and fees have continued to hamper the competitiveness of the Nigerian manufacturing sector in the regional and global space. They have also warned that this multiple taxation has put goods produced in Nigeria to be uncompetitive to products from other African countries in the new regional market, the Africa Continental Free Trade Area, AfCFTA. With Nigeria’s corporate tax rate at over 30 per cent, which is well above the global average at 23.37 per cent and African average at 27.6 per cent, the products from Nigeria are not competitive.
The association has also lamented that the manufacturing sector is groaning under a multiplicity of taxes and levies being charged by various government agencies. This development, according to MAN, has led to small and medium enterprises, SMEs, losing about 9 per cent of their total income yearly, which runs into billions of naira, to such multiple charges. In spite of this worrying development, the association has disclosed that there are about 17 new bills aimed at imposing more levies on the manufacturing sector currently before the National Assembly, which undoubtedly will be compounding the already difficult situation in the sector.
Speaking further on this pathetic situation in the manufacturing sector, the Director General, MAN, Segun Ajayi-Kadir, said that manufacturers pay over 30 different taxes, levies and fees to agencies of the federal, state and local governments.
These include: Company Income Tax; Stamp Duties; Petroleum Profit Tax; Capital Gains Tax; Value Added Tax; Personal Income Tax; Withholding tax; Tertiary Education Tax; 1% of payroll contribution to NSITF; 10% of Payroll contribution to PenCom; 1% of payroll ITF Levy and National Information Development Levy.
Others are Cabotage Levy; Radio and TV Licenses; Police Special Trust Fund Tax Levy; Niger-Delta Development Commission Levy; National Agency for Science and Engineering Infrastructure levy; Land Use Charge; Parking Fee; Consumption Tax; Road Tax; Standard Organization of Nigeria Fees; Nigeria Content Development Levy; NAFDAC Levy; Nigeria Health Insurance Authority contribution; Signage Fees.
Ajayi-Kadir also reiterated the warning by the association that the impact of multiplicity of taxes imposed on the manufacturing sector in Nigeria may hinder the sector from maximizing the potential gains in AfCFTA.
He told the just concluded annual tax conference of the Chartered Institute of Taxation of Nigeria, CITN, in Abuja that taxes from federal, states and local governments impact manufacturing, hindering the development and competitiveness of the sector.
“The imposition of overlapping taxes has created compliance burdens, operational inefficiencies, and reduced profitability for manufacturers. Duplication of taxes increases production costs and final prices of goods and services, eroding profit margins and hindering investment incentives,” he said.
He disclosed that a survey conducted by MAN in 2023 revealed that numerous taxes with overlapping effects that add complexity and burden to businesses.
“Sales tax and Value Added Tax,1 VAT, mobile advertising charges, education levies, tenement rates, Land use charges, and parking fees contribute to financial burdens for manufacturers.
“Multiple taxes discourage investment, stifles entrepreneurship, and hampers economic growth, affecting small and medium industries, SMIs, disproportionately,’’ he added.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, CPPE, Muda Yusuf, has also warned that many manufacturing investors are now migrating to the services sector due to high operating costs.
Reacting to heavy tax burden on Nigerians, the President of the Lagos Chamber of Commerce and Industry, LCCI, Gabriel Idahosa, called for caution in the implementation of these taxes in order to avoid the unintended consequences in the polity.
Speaking on the Cybercrime Levy, though suspended for now by the Central Bank of Nigeria, CBN, Idahosa stated the Federal Inland Revenue Service, FIRS, is charged with the responsibility of revenue generation for the federal government and called for unified action to bolster its capacity for efficient service provision.
Idahosa told Arise News in a recent interview that there was an urgent need to slow down in additional more pressure on Nigerians. According to him, “even if the cybersecurity law was legitimate or the way the CBN interpreted it was perfect, the argument is still correct that Nigerians are going through a lot now and perhaps, we should get some breathing space before you bring on more and more”.
Idahosa further argued against the trend of introducing levies for various purposes, highlighting the challenges associated with managing public finance in the country.
Emphasising the role of the FIRS as the designated body responsible for revenue generation for all government services, he called for a concerted effort to strengthen its capacity, adding that less than 40 per cent of taxable persons are currently taxed in the country, indicating a significant gap in revenue collection.
In the same vein, the Nigerian Economic Summit Group, NESG, faulted the timing of Cybersecurity Levy, saying that Nigerians were already battling with high food prices among other challenges.
The NESG urged the federal government to reconsider the levy as Nigerians are currently groaning under multiple taxation and inflationary pressures.
In a statement, the NESG said that “amidst the cost of living crisis exacerbated by rising inflation, the cybersecurity levy is mistimed”, considering the high rate of financial exclusion and increased currency in circulation.
“The NESG posits that the levy should be targeted at high-net-worth individuals and a specific amount transferred electronically to allay the fears of the populace, who are still battling skyrocketing food and non-food prices. However, if this policy remains, several Nigerians will boycott electronic funds transfers, which does not even bode well for the government due to revenue loss from electronic transfer levy.
“The NESG, however, feels this is a critical time to implement such a policy. The impacts of the fuel subsidy removal, exchange rate reform, and, most recently, the removal of electricity subsidies still permeate the operating costs of businesses and citizens’ welfare.
“The government must be cautious of the numerous strenuous policies that stiffen the purchasing power and welfare of corporations and individuals. Therefore, the government needs to properly sequence reforms for efficient socioeconomic outcomes, especially those that strain the people.”
NESG also raised concerns that the policy was introduced at a time when the Presidential Committee on Fiscal Policy and Tax Reforms has not finalised its mandate.
“To avoid conflict of interests and ensure no policy misalignment, the NESG strongly believes that the levy should be deferred and proper consultation until the Fiscal Policy Committee deems it necessary to implement it.
“The cybersecurity levy needs to be reconsidered, considering the CBN’s concern about the high rate of financial exclusion.
“The cybersecurity levy adds to the list of levies and taxes collected by financial institutions on behalf of the government, including stamp duty, electronic transfer levy, and VAT. This embodiment of taxes increases the transaction costs of using a bank and could disrupt the financial intermediation role of banks,” the statement said.
Apart from the concerns raised by these associations and professional groups, some eminent Nigerians, politicians have also warned of the inevitable consequences of imposing multiple taxations on Nigerians.
But the federal government and its agencies have not been adamant as some assurances have been made towards ameliorating the hardship caused by these financial policies.
Although the recently introduced Cybersecurity levy has been suspended, the federal government is already tinkering with tax reforms.
According to the Vice President, Kashim Shettima, the tax reforms under the administration of President Bola Tinubu is targeted at improving the system for the overall benefit of all Nigerians.
According to him, contrary to speculations in some quarters, “we are not here to frustrate any sector of our economy but to create an administrative system that ensures the benefits of a thriving tax system for all our citizens.”
The Vice President, who was represented by the Special Adviser to the President on General Duties (Office of The Vice President), Aliyu Moddibo Umar, at the close-out retreat of the Presidential Fiscal Policy and Tax Reforms Committee held recently in Abuja, explained the policy thrust of the administration’s tax reforms.
He stated that the dynamics of the nation’s fiscal landscape prompted the Tinubu administration to pause and reconsider the direction it was going.
“Our aim remains the revitalisation of revenue generation in Nigeria while sustaining an investment-friendly and globally competitive business environment,” he said.
While reiterating the ability of the committee to deliver on its mandate, the Vice President emphasized the significance of the task ahead, noting that “we are gathered today because we are transitioning from the phase of proposal in the operations of this committee’s work to the phase of implementation.
“I am confident that both the federal and state governments stand ready to ensure the effective implementation of your reform proposals, and we shall provide the institutional framework to guarantee the adoption of the consensuses of this committee, aligning them with our economic agenda,” Shettima added.
Meanwhile, the Nigeria Labour Congress and Trade Union Congress have given the federal government a deadline of May 31, 2024, to reverse the hike in electricity tariff.
The unions took the decision at the end of a jointly held National Executive Council meeting.
“The NEC once again vehemently condemns the unilateral increase in electricity tariff by the authorities. This action, taken without due consideration for the economic hardships faced by the masses and the provisions of the Law, is deemed unjust and burdensome. The NEC reaffirms its demands for an immediate reversal of the tariff hike and the vexatious apartheid categorization into Bands to alleviate the suffering of Nigerian workers and citizens and gives the National Electricity Regulatory Commission and the federal government until the last day of May 2024 to meet these demands,” the organized labour said after the national executive council meeting of the group.
It will be recalled that the Organized Labour, comprising the Nigeria Labour Congress, the Trade Union Congress and their affiliates recently took their protests to the offices of the NERC nationwide over the recent hike in electricity tariffs.
The NERC had in April announced the hike in the electricity tariff with customers on Band A to pay N225 per kilowatt-hour, up from N68/kWh with the promise of providing of 20-hour electricity supply to the group.
Apart from the preventable hardships which millions of Nigerians are subjected to daily by the anti-people policies of government, which have been triggering high inflation, poverty, high unemployment rate and above all worsening insecurity across the country, every effort should be made to restore the confidence of the people on the government, which is presently at the lowest ebb. This can be achieved by urgently reviewing the country’s fiscal landscape, revitalise the revenue generation and sustain an investment-friendly and globally competitive business environment for all and sundry.
A.
-May 21, 2024 @ 11:30 GMT|
Tags: AfCFTA. Goddy Ikeh NERC Nigerians groan over multiple taxation
