SMEs Over Taxed In Nigeria – NNEW | Independent Newspapers Limited
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SMEs Over Taxed In Nigeria – NNEW

Posted: Jul 15, 2016 at 6:31 pm   /   by   /   comments (0)

Ikechi Nzeako


SMEs play a very critical role in the development of the Nigerian economy by providing employment for a huge majority of Nigerians.

Speaking at the Wole Soyinka Centre Media Lecture Series 2016 with the theme: Tax education, national development and the seminal role of the media, Mrs. Edobong Akpabio, second vice-president, NECA’s Network of Entrepreneurial Women (NNEW), who represented Mrs. Modupe Oyekunle, president of the organisation, said NNEW has been in the forefront of advocacy efforts for the review of the tax environment in Nigeria for Small and Medium Enterprises (SMEs), where majority of its members belong.

According to her, SMEs make up about 97 per cent of the entire business environment (quoting the Federal Bureau of Statistics), adding that they serve as a source of employment generation, innovation, competition, economic dynamism, which ultimately lead to poverty alleviation and national growth. They are also a source of tax/fiscal revenue.

Akpabio described tax payment as an obligation imposed by the government on personal income earners, companies, investors, exporters, importers etc, adding that the revenue so realised is a major source of revenue to the government, and an important tool for the nation’s development.

She stated that tax policy is one of the factors that constitute the economic environment of SMEs, adding that a symbiotic relationship exists between the growth of SMEs and the tax policy environment in which they operate in Nigeria.

According to her, there is a general perception that tax is an important source of government income for the development of the economy and provision of social services, she, however, argued that there is a significant negative relationship between government taxes and the sustainability and expansion of SMEs in the country.

The second vice president of NNEW averred that SMEs are faced with the problems of high tax rates, illegal taxes, multiple/double taxes, complex tax regulations and lack of proper enlightenment or education about tax related issues.

She, however, emphasised that the mortality rate of SMEs is very high because of the prevailing harsh economic conditions in the country.

According to the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), 80 per cent of SMEs die before their fifth anniversary in the country.

Akpabio listed the factors responsible for these untimely ‘deaths’ of SMEs as tax related issues, ranging from multiple, double, arbitrary and illegal taxations to enormous tax burdens, etc.

She insisted that Nigerian government in its policies view and treat SMEs in the same light as large corporations, adding that their importance as a mechanism of economic growth and development is often ignored.

“Tax, therefore, which is an important and major source of funds for government expenditure, becomes a burden and a major problem, as SMEs are not favoured by the current tax systems and policies,” she said.

The business lady stated that some businesses are already collapsing; while majority are struggling to meet the high tax rates just to keep their business doors open.

Akpabio explained that “SMEs experience harassment and intimidation by tax authorities, especially in matters of illegal, arbitrary and disputed taxes, saying that these unfortunate situations result in embarrassments, disruption of business transactions, distortion of business projections, and manifest poor compliance.”

On how government can use policies on taxation to support indigenous businesses in order to obtain a vibrant and flourishing SME sector, she said that the government tax policy needs to be appropriate such that it is neither an encumbrance to the SMEs nor a disincentive to voluntary compliance.

She suggested that government should recognize indigenous businesses, as a distinct development partner in Nigeria, adding that there has been so much emphasis on foreign investors while the local investors are virtually ignored.

The NNEW leader said that government should increase tax incentives for SMEs by reducing their tax rates in order to encourage their establishment, profitability and sustainability.

She called on government to increase support services from the tax authorities for SMEs.

She stressed the need for proper awareness, information, and education of the taxpayer as well as the tax officials, adding that there should be transparency in the communication of tax information – posters, handbills, radio jingles, TV adverts, etc to the tax official and taxpayer. The procedure, she said, should be simple and straightforward.

According to her, the tax offices should be conducive and free of touts and other undesirable elements, adding that they are an aberration in any formal setting and should not be accommodated in a public institution.

Akpabio said there should be continuous and visible improvement in the quality of customer service to the tax-paying public and recommended an automated tax system, which provides ease of transaction for taxpayers and accurate information/records for the tax authorities.

She said that there should also be avenues for redress and/or dispute resolution for the taxpayer, adding that the current system with only one Tax Tribunal at the Federal level and none at the state and local government levels is inadequate.

She said that there are issues of tax credits/tax refunds that are not honoured by tax authorities and payment of withholding taxes with receipts not issued and called for the creation of opportunities for government/businesses collaboration for an effective tax regime in the country.

Speaking on the economy, she said that as a result of the downturn of the economy in the last 20 years, there has been a huge interest, awareness, and embrace of entrepreneurship all over the country, especially by the youth who make up about 70 per cent of the country’s population. This, she added, has resulted in the establishment of millions of businesses within the period and an increase in the tax-paying public.

According to her, there has also been a higher inclination for these businesses to join trade and business associations, providing government with the advantage of engaging hundreds of them in their clusters.

These, she said, are opportunities for government to recognize SMEs as partners and stakeholders and to engage them in the development enactment of tax policies for the benefit of the nation’s economy.

Akpabio opined that opportunity exists for government to provide a conducive environment for businesses to thrive for increased tax collection, stating that government must redeem its image by honouring its statutory responsibility by providing adequate and functional infrastructure for the benefit of the business community.

She, however, called on the media to support business to resolve challenges regarding taxation.

She argued that the Nigerian tax system has undergone significant changes in recent times, saying that with the help of various studies and research done by tax experts, tax laws are being reviewed with the aim of repealing obsolete provisions and simplifying the main ones.

She argued that the media could support businesses to resolve challenges regarding taxation by improving the dissemination of information, impartation of knowledge through in-depth discussions and analyses of diverse perspectives to tax policies and initiatives; and coverage of stakeholder engagement platforms and tax advocacy projects.

She called on the media to hold government accountable for tax revenues and expenditure by enforcing their right under the FOI Act, adding that the media can also highlight, in their news stories, threats to the harmonious relationship among the various tax publics.

She argued that apathy and poor compliance to tax payment are a result of the perception (and in most cases, reality) of government’s misuse of taxpayers’ funds, adding that there are difficulties in compliance as a result of poor customer service by tax authorities or unreasonable bureaucracy.

The NNEW boss called for an end to harassment of taxpayers by illegal ‘tax collectors’, arbitrary tax demands, and overzealous tax officials.

She said that there has been migration of businesses to other locations as a result of the unbearable tax burden in the previous location.

Akpabio said NECA Entrepreneurial Women (NNEW) was established in 2005 as a business membership organization for women entrepreneurs.