Announcement have been made that if indications are anything to go by, there is no relief in sight yet for manufacturers in the country as their tax burden is being increased. This is because the Federal Government has increased the number of taxes collectible by the Federal Inland Revenue Services, FIRS, from a previous 39 to 61 items.
Some of the new taxes as contained in the schedule to the taxes and levies (Approved list for collection) Act (Amendment Order), 2015 , include: “ National Information Technology Development Levy, Economic Development Levy, Environmental (Ecological) Fee or Levy; Inter-state Road Taxes; Mining, Milling and Quarrying fee; Infrastructure Maintenance Charge; Social Services Contribution Tax, and Wharf Landing Fee where applicable.
Others are Entertainment Tax, Produce Sales Tax, Property Tax (where applicable); Fire Service Charge; Slaughter or Abattoir fee, where state finance is involved, etc.” Vanguard investigations reveal the decision by government to widen the tax net is to make taxation a major source of revenue in the face of dwindling incomes from crude oil. Currently, manufacturers are paying corporate income tax of 30 per cent which they said is a disincentive to their investments and are imploring government to reduce it to 20 per cent.
Similarly, they are also complaining of 10 per cent on Value Added Tax; Education Tax (2 per cent), 5 per cent Stamp Duty, Withholding Tax on companies (10 per cent), and the latest, according to Manufacturers Association of Nigeria (MAN), is the imposition of taxes by the National Lottery Regulatory Commission on companies for conducting promotion activities to boost their sales as part of effort to respond to challenges of competition. Vanguard learned that although the collection of the taxes and levies listed in the schedule have not yet been harmonized among the Federal, states and local Governments, yet the FIRS is poised to go tough on its implementation and compliance.
It was further learned that the incidence of multiple taxes have been on the increase since 1996 when the then military administration of General Sani Abacha introduced external consultants to collect taxes in the wake of what was termed ‘Accelerated Revenue Generation’ (ARG). In response to the astronomical rise in the number of taxes and levies, and the numerous complaints from economic actors in the country, the Federal Government directed the Joint Tax Board in 1997 to publish a list of the approved taxes and levies collectible by each tier of government. The list compiled by the JTB was thereafter enacted into law in 1998 as Taxes and Levies and Approved List for collection) Act No 21 of 1998.
The purpose was to eliminate multiple taxes and levies across the three tiers of government and to facilitate inter-state trade. However, the problem of multiplicity of taxes and levies still persists. Recently, World’s tax expert, PricewaterhouseCoopers (PwC) rated Nigeria’s tax contribution to Gross Domestic Products, GDP, lowest in the world. Partner/Head, Tax Regulatory Services, PwC, Mr. Taiwo Oyedele, said: “Nigeria’s tax contribution to the GDP is the lowest in the world being three percent compared to United States 19 percent; China 21 percent and Japan, tax contributes 35 percent. Similarly, he said that in Germany tax accounts for 45 percent of GDP, France 52 percent, Ghana 22 percent; South Africa 27 percent and Kenya 17 percent.” According to him, being aware is not enough; proactive tax risk management and continuous tax risk assurance should be the mantra of every forward looking tax function.
The Executive Chairman, Federal Inland Services, FIRS, Dr. Babatunde Fowler, disclosed that FIRS has identified several opportunities to improve their collaboration with taxpayers especially in the area of data and knowledge sharing and stakeholder engagement. “We recently appointed state coordinators to cover a maximum of three states to bring tax administration closer to the people and reduce span control. We also recently commenced a policy giving taxpayers an opportunity to choose a tax office nearest to their place of business for their tax affairs,” he stressed.
The president of LCCI, Chief Nike Akande, noted that taxation has been a major source of revenue for the nation in the past decades and given the severe revenue challenges faced by governments at all levels as a result of the sharp drop in oil price; the focus of government on taxation has been increased. “We will situate the current drive for tax revenue and internally generated revenue by the state governments in the context of current investment environment challenges. Ensuring a balance on these issues is worthy of engagement with tax authorities.
Documentation for taxation In the light of these developments, it has become necessary to bring stakeholders together to share perspectives on the current status of the Nigerian tax system as well as educate and enlighten business owners on proper documentation for taxation” she said. Reacting to the development, Dr. Frank Jacobs, President of Manufacturers Association of Nigeria, MAN, who spokes for that manufacturers who will pay the taxes, said: “I haven’t got the new taxes list. But if the additional taxes and levies are allowed to sail through, it is going to destroy manufacturing in this country; I hope it is a mirage. I hope it is not true because it will be very hard on all businesses in Nigeria; it is going to stifle more businesses and the idea of creating employment and diversify the economy will be a mirage.”