At the last count, manufacturers pay over 30 different taxes, levies and fees to agencies of the federal, state and local governments. Although, this came in the wake of the increased revenue targets by government agencies, manufacturers are screaming blue murder that the barrage of taxes is depressing production and discouraging investments in the manufacturing sector. They are calling for a breather in the form of reduction of the various tax rates and harmonisation of the regulatory checklists.Assistant Editor CHIKODI OKEREOCHA reports.
The spectre of multiple taxation and over-regulation by government agencies is hunting the economy. It has continued to leave sour taste in the mouths of manufacturers and other real sector operators. For instance, manufacturers pay over 30 taxes, levies and fees to agencies of the federal, state and local governments.
As if this is not enough to depress production and discourage investments in the manufacturing sector, agencies of the federal, state and local authorities allegedly regulate the same manufacturing process, resulting to heavy man-hour losses, supervisory duplication and multiple regulatory charges.
It is against this backdrop that not a few operators, particularly owners of Nigeria’s estimated 41 million Medium, Small and Micro Enterprises (MSMEs), who appear to be worst hit, feel that the time has come to streamline the multiplicity of taxes and ensure that only approved taxes, levies and fees are charged.
They also believe that harmonising the operations, regulatory checklists and mandates of agencies of government at all levels to promote friendlier operating environment will be perhaps, one of the best New Year’s gifts to real sector operators by President Muhammadu Buhari’s administration.
The Nation learnt that most industrialists consider the prevailing tax/regulatory environment in the country as unfriendly and a major factor for the increasing cost of doing business, which in turn reduces the industrial sector’s competitiveness.
The fact that 89 per cent of Manufacturers Association of Nigeria (MAN) Chief Executive Officers (CEOs) agreed that multiple taxes and levies depress production in the manufacturing sector perhaps, reinforced this widely held belief.
The manufacturers CEOs Confidence Index (MCCI), which gauges the pulse of the economy quarterly, said majority of MAN CEOs interviewed (89 per cent) agreed that multiple taxes and levies, depress production in the manufacturing sector.
The MCCI deploys a set of diffusion factors, including business operating environment issues, such as over-regulation, multiple taxes/levies, access to sea ports, local and raw-material sourcing, to measure a quarterly perception and confidence of manufacturers in the economy.
A questionnaire structured with the diffusion factors, macroeconomic and business environment variables was administered on the CEOs of MAN member-companies across the six geo-political zones of the country and the 10 sectoral groups of the association.
The responses provided by the CEOs were used to compute the Index, which was released last week.The report said manufacturers pay over 30 different taxes, levies and fees to agencies of the federal, state and local governments, attributing the situation to the increased revenue targets by various government agencies.
To further drive home their point, MAN CEOs, based on the degree of intensity of challenges that confronted their operations in the third quarter, ranked the duo of multiple taxation and overregulation as second. Inadequate electricity supply and high cost of self-generated energy was first on the list.
They emphasised that multiple taxation and over-regulation, and of course, inadequate electricity supply, among other challenges, resonate with the ranking obtained in the two previous editions of the MCCI.
Manufacturers, therefore, underscore the need for the government to address the challenges to enhance the competitiveness of the manufacturing sector and return it to the path of sustainable growth.
The Lagos Chamber of Commerce and Industry (LCCI) has also lent its voice to the call on the tax authorities to lessen the burden of multiple taxation on businesses, especially the Small and Medium Enterprises (SMEs).
Admitting that there are issues around taxation, LCCI President, Mrs. Toki Mabogunje, said: “Tax is something we have been addressing overtime, but more needs to be done because for SMEs, the burden of taxation is quite huge and it can stifle growth.”
Mabogunje, in an interview with The Nation, recalled that when President Buhari before the last election, was travelling around the country and seeking the support of Nigerians for a second term, the issue of growth of Micro, Small and Medium Enterprises (MSMEs) was a major subject.
Mabogunje said: “We had a certain level of income generation, where you pay a tax that covers everything; it is when you cross that barrier that you need to pay other kinds of taxes. That is yet to come to reality, but we are still pushing for that.
“But I think the one thing that seems to be getting more and more attention is that the country is beginning to realise that MSMEs are actually the foundation.
“They are also thinking that we have to grow from small to medium and medium to large. We need more of the Dangotes; we need more like the big industrialists that we have in the country.”
There are 41 million MSMEs in the country, according to a national MSMEs survey carried out in 2017, by the sector’s regulatory agency, the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), in collaboration with the Nigerian Bureau of Statistics (NBS).
However, a plethora of challenges, including multiple taxation and over-regulation, have continued to undermine the profitability and competitiveness of MSMEs in Nigeria.
How multiple taxation hurt manufacturers
Nigeria is a federation made up of federal, state and local governments. Each tier of government is saddled with the responsibility of providing certain services to the citizens and is also granted the funding source through the imposition and administration of assigned taxes and levies.
In other words, modern governance is premised on a social contract that obligates the citizens, including corporate entities to pay taxes to the government and in turn, mandates government to provide certain goods and services for the well-being of the citizens.
However, the perceived shoddy and un-coordinated nature of Nigeria’s tax administration appears to have put real sector operators, particularly manufacturers in a disadvantaged position in what is supposed to be a mutually rewarding social contract.
To manufacturers, Nigeria’s un-coordinated tax system is a major dis-incentive; it has resulted to multiple taxation, which is taking a huge toll on businesses and reducing the global competitiveness of the industrial sector.
This was why at various fora organised last year by MAN and other members of the Organised Private Sector (OPS), including the LCCI and the National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), the need for a more business-friendly tax regimewas top on the agenda.
The operators never stopped lamenting that the incidence of multiple taxation and astronomical increase in taxes and levies has led to disruption of businesses.
For instance, in Lagos State, which parades a concentration of manufacturing concerns, they note that in addition to the taxes paid/payable to the Lagos State Government under Act CAP.T2 Laws of the Federation of Nigeria 2004, a total of 10 other taxes/levies are being collected.
The Nation learnt that some of the taxes that have been giving industrialists sleepless nights include environmental development levy/charge, environment impact assessment levy/charge, and land use charge.
Others are Lagos State Environmental Protection Agency (LASEPA) levy (laboratory analysis), Ministry of Transport (MOT) road worthiness charge, LASEPA petroleum storage charge for tanks above 10,000 litres.
There are also solid waste charge, chemical storage permit, Lagos State Waste Management Authority (LAWMA) levy for waste disposal, and Lagos State fire service charge, among other levies and charges.
The manufacturers’ grouse is that the application of these multiple taxes/levies impact negatively on companies. Apart from restricting business expansion and reducing profit, the situation, according to them, creates unemployment, retards economic development and growth.
Apart from discouraging both local and foreign investments, multiple taxation also does not allow local products to compete with imported ones. The alleged use of unorthodox means of collecting taxes and levies also breeds corruption, which invariably stunt economic growth.
However, amidst the hue and cry over multiple taxation, a highly placed government official said there is need to distinguish between taxes, levies, penalties and user charges. According to the official, who declined to be mentioned, generally, a tax is a compulsory financial charge or levy imposed by governmental authority, and for which no direct benefit is derived by the taxpayer.
On the other hand, he said payments required for services rendered by the government are basically user charges. “Strictly therefore, multiple taxation can only be said to exist where different tiers of governments are levying taxes on the same activity/income,” the official clarified.
He advised taxpayers to refer grey areas to the tax authorities for clarification, and where they disagree, they should utilise dispute resolution procedures available in the tax laws, as well as keep in focus that payment of tax is obligatory and not optional and that there are sanctions for non-compliance with statutory provisions.
The official, however, assured of the current administration’s commitment to pursuing further reforms of the tax administration system with a view to further simplifying the assessment and payment process, enhancing transparency and harmonising taxes and levies collectible.
The Nation learnt that as part of the on-going reform of the country’s tax system, the various tiers of government and their respective tax-collecting agencies have stepped up their tax education and enlightenment campaigns and set up revenue complaints unit.
The harmonisation of local government levies and rates is also said to be on-going in some states across the country particularly Lagos.
Some of these measures are in response to manufacturers’ calls on government to educate the public and facilitate compliance on the published list of approved or authorised taxes and levies in the state, local governments and its MDAs.
Over-regulation also
For manufacturers and indeed, other businesses across the country, the fear of the alleged high handedness of some regulatory agencies and multiple inspections/visitations from Ministries, Departments and Agencies (MDAs), amongst others, is perhaps, the beginning of wisdom.
They lament that quite often, agencies of the federal, state and local authorities regulate the same manufacturing process, resulting to man-hour losses, supervisory duplication and multiple regulatory charges.
“It is expedient that government harmonizes the operations, regulatory checklists and mandates agencies of government at all levels to promote friendlier operating environment, MAN said, in its MCCI.