Industrialists are lamenting that the un-coordinated nature of Nigeria’s tax administration, which results to multiple taxation, is taking a toll on businesses and reducing the global competitiveness of the industrial sector. The industrialist, at a business luncheon organised by Manufacturers Association of Nigeria (MAN) for Chief Executive Officers/Managing Directors of member-companies, called for a more business-friendly tax regime, reports Assistant Editor Chikodi Okereocha.
It was a business luncheon organised by the Manufacturers Association of Nigeria (MAN) exclusively for chief executive officers/managing directors of its member-companies, but the razzmatazz and camaraderie barely covered the worries in the minds of the participants over the state of the industrial sector.
At the luncheon, which held last week at MAN Centre Complex, Ikeja, Lagos, the captains of industry could not hide their displeasure over what they described as Nigeria’s un-coordinated tax system, which, according to them, led leads to what is referred to as multiple taxation.
To the industrialists, multiple taxation, which is a direct result of the nation’s shoddy tax administration, now verges on overkill and is one of the greatest disincentives to business. Specifically, the industrialists consider the tax environment, particularly in Lagos State, as unfriendly and a major factor for the increasing cost of doing business in the country, which in turn reduces the industrial sector’s global competitiveness. For them therefore, the fear of multiple taxation is the beginning of wisdom. This was why the theme of the luncheon ‘Multiple Taxation: A Disincentive to Industrialists” was considered apt and timely.
Chairman, Ikeja branch of MAN, Prince Oba Okojie, set the ball rolling, lamenting that the incidence of multiple taxation and astronomical increase in taxes and levies has led to disruption of businesses in the state. He noted, for instance, that in addition to the taxes paid/payable to state government under Act CAP.T2 Laws of the Federation of Nigeria 2004, a total of 10 other taxes/levies are being collected by the Lagos State Government. Okojie listed some of the taxes that have been giving industrialists sleepless nights to 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, solid waste charge, chemical storage permit, Lagos State Waste Management Authority (LAWMA) levy for waste disposal, and Lagos State fire service charge. Okojie said multiple taxation has added to the growing list of challenges facing industrialists such as insecurity, high lending and exchange rates, high handedness of some regulatory agencies, and multiple inspections/visitations from Ministries, Departments and Agencies (MDAs), amongst others.
The MAN Ikeja branch chairman pointed out that the application of multiple taxes/levies impact negatively on companies. Apart from restricting business expansion and reducing profit, he said the situation creates unemployment, retards economic development and growth, discourages both local and foreign investments, and breed corruption. Besides, multiple taxation, he said, does not allow local products to compete with imported ones. According to him, these factors are responsible for stunting the growth of the Nigerian economy.
He argued that in order to encourage investments within and outside the state,it must create new jobs and engender high economic growth; government must put in place an acceptable tax system, and outlaw the use of unorthodox means of collecting taxes and levies. Also, government, he insisted, must 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.
To the worries expressed by industrialists over multiple taxation, the Lagos State Government, through itsCommissioner for Economic Planning & Budget, Ben Akabueze,made a number of clarifications. Akabueze, who was guest speaker at the occasion,said because 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.
Akabueze however, said there is need to distinguish between taxes, levies, penalties and user charges. According to him, 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, 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,” he clarified.
As the commissioner explained, modern governance is premised on a social contract that obligates the citizens to pay taxes to the government and in turn mandates government to provide certain goods and services for the well-being of the citizens. While noting that governance of Lagos State should not be on a different basis, he said MAN should assist in sensitising its members towards a tax compliance culture. He also said it is essential for MAN to censure and sanction members when they act in defiance of well established laws.
“Voluntary compliance with tax regulations is the way forward as it is a win-win situation for all parties concerned. To the government, it reduces cost of administration, increases tax revenue, and ensures good governance. On the part of the tax payer, it leads to certainty of tax obligation, prevents disruption of businesses with its attendant legal cost and bad publicity. It therefore, behoves members of MAN and other tax payers in general to ensure, among other things, that taxes deducted are remitted as and when due, and that necessary books of accounts and other documents/information are made available for inspection whenever the need arise,” he stated.
The commissioner added that taxpayers should 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. He also harped on the need to maintain international best practice in tax compliance and build a reservoir of credibility.
Akabueze however, said the state government, on its part, will continue to operate a proactive, responsive, transparent, efficient and effective revenue service. “The Lagos State Government will continue to provide the enabling environment for economic growth and development by passing appropriate legislation, and implementation of citizen-focused policies and programmes,” he said.
While noting that the bulk of these projects/programmes are financed from Internally Generated Revenue (IGR), he promised that government will pursue further reforms of the tax administration system in the state with a view to further simplification of the assessment and payment process, transparency and elimination of power of discretion in the hand of revenue officers, harmonisation of taxes and levies collectible, reduction in the cost of compliance, voluntary compliance and increase in IGR.
The commissioner listed key aspects of the tax reforms in Lagos to include the Lagos revenue administration law, simplification of the tax assessment and payment procedure, tax education and enlightenment, expansion of the Lagos State Internal Revenue Service (LIRS), establishment of presence in all the major markets, and consultations with tax payer groups. Others are: enforcement of statutory provisions, harmonisation of local government levies and rate, consolidation of charges, and the setting up of revenue complaints unit.
President of MAN, Dr. Frank S.U Jacob, expressed confidence that the luncheon would further evolve additional road map germane to the effective implementation of the ongoing tax reform, strengthen the existing cordial public-private sector relationship, and further deepen government efforts geared towards transforming the manufacturing sector.
He said on its part, MAN under his leadership, has unfolded plans aimed at reducing the cost of manufacturing and improving the business environment for manufacturers in the country. “MAN will continue to work towards an environment that will enhance the sustenance of existing manufacturing outfits and attract new investments,” he promised.
The MAN President listed the new Council’s plan for the next four years to include greater interface with government at all levels to enhance MAN’s advocacy platform, creating a more robust data bank, strengthening the economics and research department, and improving the collaboration between MAN and research institutes and tertiary institutions, among others.
He said he has no doubt that the luncheon would promote a business friendly tax environment critical to the competitiveness of Made in Nigeria products and the continued survival of industrialists.
