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By Merit Ibe, [email protected]
Members of Nigeria’s Organised Private Sector (OPS) has blamed the overbearing regulatory agencies for the difficult operating environment in which businesses are being conducted.
Accordong to OPS, most entrepreneurs are groaning today over the incident of multiple taxation and decentralised revenue collection by agencies which have continued to inflate taxes amid insecurity, dearth of infrastructure and other incidental business costs.
Manufacturers said they have confirmed issues of multiple and duplication of regulation, which often find expression in the excessive drive for tax revenue instead of widening the tax net. They argued that unfriendly tax practices of government’s agencies are seriously impeding businesses.
The private sector is not left out of the pain, as it has kicked against the imposition of new taxes on businesses, citing concerns for increased tension in a struggling business environment.
While manufacturers are concerned about the business environment, the services sector is worried about government’s plans to raise revenue through new taxes.
Chairman, Federal Inland Revenue Services (FIRS) working Group Committee, Daniel Dickson-Okezie, for instance asserted that there has been improvement in recent times. The issues of double taxation has been a major hurdle in the ease of doing business in Nigeria.
Dickson-Okezie said the FIRS and LIRS have done well in trying to reduce cases of double taxation; in a situation where one pays to the Federal Government and still pays similar tax to state and local governments. He noted that the incidence of double taxation seems to be worse with the local government.
“The case of the local governments is yet to be fully taken care of. The issue of vehicle stickers and taxes for haulage still persists. The Organised Private Sector is still kicking against the practice.”
He lamented that the major challenge businesses are having with taxes and regulatory agencies is the issue of corruption in the system, which discourages investors. “Rather than working toward insuring how they can generate revenue for government through civil means and persuasion, the tax agencies extort and harass business owners.
FIRS is trying in recent times to create awareness by opening some windows that can make SMEs pay their taxes easily, when you get down to various tax offices, their attitude discourage business owners.”
Dickson-Okezie, who is also chairman, SMES Group of the Lagos Chamber of Commerce and Industry (LCCI), said corruption in the tax system in the country discourages investors, it reduces government’s revenue, which makes it difficult for government to generate its actual revenue. Asserting that the FIRS has in recent times made a lot of progress in the enlightenment of tax payers, he was of the view that dealing with over 100 million Nigerians was not an easy thing. “There is a lot to be done in that regard. So, the FIRS working group committee is working hand in hand with the FIRS to see the best way to reduce corruption in the system as well as make them do their jobs and also raise revenue for the government.
“We also have challenges with the NAFDAC. During our interface with the director general and top management of the agency at a workshop, we were told how they were carrying out enlightenment programmes, playing their roles and enforcing discipline among their staff and how they have been trying to ease transactions. He decried the fact that NAFDAC remains a major challenge down to all levels. “I told the DG of NAFDAC that she has really been trying, we must give that to her, but Nigeria is such a big place. I gave an instance of fake products within mammy markets in various barracks in Nigeria and trade fair complex. People are producing fake wines and drinks in these places. NAFDAC needs to move in and get these people who are endangering the lives of our people arrested. The rate of enforcement is still very low. They need to be in charge. I think NAFDAC needs more personnel and better enforcement to track down these fake products and their producers. Sometimes when they are alerted, they move in and get bribes from the defaulters, who still continue in business. It’s worrisome.The current DG has brought enough innovation into the system.
“Tax agencies try to discourage genuine business owners by way of incessant harassment and extortions. There are some traders who don’t pay tax, they need to be discovered to expand the tax net, not discouraging genuine tax payers.
The Customs is another major problem. They are killing businesses. They are suppose to ensure people pay taxes and ensure that contrabands are not brought into the country but reverse is the case.
The Corporate Affairs Commission (CAC) is another regulatory agency that is to ensure that all companies and organisations are registered and file annual returns to the commission. Now you find out that their own problem is the issue of killing the idea of ease of doing business. You are asked to go online and register and at the end of the day, you find some little things that will make the exercise impossible, at last you get back to their office where the staff will extort money from you.
These agencies frustrate business in one way or the other.
Transporters have their own complaints. They sell all manners of stickers, You get one sticker in Lagos, when you get to another state you have to pay again for the same sticker. Multiple taxation killing business is the order of the day. You have some paying for Television license inside their shops. Touts all over the town in Lagos also collect their own levies. Pay for land, pay for the barrow and so on.
A survey by the Manufacturers Association of Nigeria (MAN) has shown that local manufacturers are paying over 30 different taxes, levies and fees to agencies of the Federal, state and local governments on account of increased revenue target.
Consequently, these multiple taxes and levies according to MAN’s survey have severely depressed production in the country’s manufacturing sector.
According to the report, many manufacturers operating in the country’s industrial sector are still groaning under growing multiple levies being charged by government agencies.
The report revealed that currently, the SMEs are losing about nine per cent of their total income yearly to multiple agencies, which runs into billions of naira following the over 30 different taxes, levies and fees to these agencies.
The Director-General of MAN, Segun Ajayi-Kadir explained that there is the need to streamline the observed multiplicity of taxes and ensure that only approved taxes/levies/fees are charged by these agencies of government.
Moreover, the MAN director-general added that government should begin to consider reducing the various tax rates as has been been the case across the world in recent times to encourage investment.
He explained that majority of businesses agree that multiple taxation and over-regulation by agencies of government depress productivity.
According to him, quite often, these agencies regulate the same manufacturing process resulting to man-hour losses, supervisory duplication and multiple regulatory charges.
He said it has become expedient for government to harmonise the operations, regulatory checklists and mandate agencies of government at all levels to promote more friendly operating environment, noting that levies being paid to the agencies are taking huge toll on operations.
He also called for expansion of the tax net to capture more tax payers.
Particularly, he said government as a matter of urgency needs to heed to the clarion call of the organised private sector by streamlining the agencies now to restore public confidence in ease of doing business in the country.
“I think it is a good policy if the government can streamline these agencies. It will be good to see one-stop shop agencies for the SMEs and manufacturing sector in Nigeria, because right now, this multiple taxation is obviously affecting most of our members. You know they have to take care of so many bills like security, light and other things. When one agency comes with a levy and before you finish with that one, another one comes, it’s quite discouraging.
Chief Executive Officer of Centre for the Promotion of Private Enterprises (CPPE), Dr Muda Yusuf agreed that, new taxes are being frequently added to the myriad of taxes on the already over-burdened private sector.
This is in addition to the burden of dealing with multiple tax agencies from FIRS to states IRS, Customs, etc all trying to collect revenue and conduct tax audits. These taxes should be harmonised.
He said the private sector has increasingly become the target for regulatory agencies seeking to raise revenue for government deficit, which continue to take a toll on the private sector competitiveness.
“Governance issues need to be addressed, as many agencies hardly make full remittance to the government coffers. The private sector has become a target for regulatory agencies, despite not adding any value to the sector.
“Constant imposition of levies and approval of licences are taking a toll on the private sector. There should be a distinction between regulatory agencies and revenue generating agencies.”
Stakeholders argue that every form of extortion is an extra cost passed to final consumers or the end-users of goods and services. When you extort, you are indirectly increasing the cost passed on to the poor masses.
They say regulatory agencies have been turned into revenue-generating bodies, creating a perverse incentive for extortion and oppression,as we can also say about the general drive for IGR.
according to stakeholders, when an agency abuses its powers, to devastating effect on businesses and the economy — there is hardly anywhere for MSMEs to seek redress. In advanced countries, regulators focus more on helping MSMEs to comply and grow. They have no interest in shutting them down.
They see it that a major failing of policy design in Nigeria is the lack of basic checks and balances on regulators.
Nigerians need their government to support them with infrastructure and incentives. When we say government should create jobs, we are not saying it should set up more parastatals. How many millions can government employ? We are saying government should create an environment for businesses to germinate. Most of these jobs will be in MSMEs. That is the engine room of every economy in the world.
Some of the biggest demons tormenting businesses in Nigeria today are in the Nigeria Customs Service (NCS). The extortion and blackmail are incredible. Any government that genuinely wants the Nigerian economy to prosper will focus on reforming Customs.
You would expect an import-dependent country like Nigeria to at least instil efficiency at the ports to save its own life. But you are expecting too much of the government. We depend heavily on imports to meet strategic and critical needs.
A port agent that preferred anonymity, said extortion is one of the biggest corruption at the ports.
“One of the biggest forms of corruption is that Customs don’t comply with the law. When you operate out of the law, it is the height of corruption.”
President of the Lagos Chamber of Commerce and Industry (LCCI), Dr Michael Olawale-Cole, advised the Federal Government to focus its attention on other areas to raise funds to implement the budget rather than over-burdening the private sector with additional taxes.
“The Federal Government should look at other areas of raising funds to implement the budget and of course tax is a must for everyone, but at the same time, we should not put too much pressure on the private sector in the area of raising revenue. We are appealing that the federal government should expand the tax net as against putting pressure on the very compliant taxpayers.”
With a few fiscal policy options available to the Federal Government for intervention in the real sector, the LCCI, has urged Federal and State governments to address the overlapping functions of regulation and revenue generation among regulatory agencies for private sector development.
Indeed, the Chamber reiterated that businesses were generally grappling with challenges of infrastructural deficiencies and macroeconomic shocks.
The chamber maintained that presently, most investors were saddled with huge cost for the provision of electricity, access road, security and other industry-specific facilities in the midst of poor access to affordable credit, multiple taxation and high exchange rate.
Citing some of the regulatory actions frustrating the ease of doing business mandate, the LCCI at a recent regulatory environment roundtable in Lagos, said the business community was still faced with high regulatory compliance costs, lack of clarity in regulatory requirements and overlapping regulatory functions, among others.
