‘75% of SMEs not in tax net’

As Nigeria struggles to raise taxes in the face of dwindling oil revenue, experts have said the government could look to the micro, small and medium enterprises (MSMEs), given that over 75 percent of them are not in the tax net.

But they warn that governments at various levels must create the right environment for them to thrive before levying taxing.  They add that various levels of government must appreciate that MSMEs are not cash cows, as they are mostly hit by the current economic crunch.

At a taxation roundtable held by the Lagos Chamber of Commerce and Industry (LCCI), Theophilus Emuwa, partner at Aelex, said MSMEs  must know  of various taxes they need to pay so as not to be taken by surprise.

“Tax compliance in Nigeria is difficult. Nigeria is 3rd most difficult economy for tax compliance by willing tax payers, ranking 181st out of 189 economies in the 2016 Ease of Paying Taxes Survey conducted by PwC and the World Bank,” Emuwa said.

Emuwa said SMEs are requested to pay 30 percent  of profits as company tax, adding that this is to be paid within two months of filing tax returns

He said in default, the MSME could be required to pay interest at bank lending rate, plus 10 percent per annum of the tax payable in addition to the tax due to it.

He said businesses must be aware of the withholding taxes on interest, dividends, rent, and royalty, among others, adding that with the dwindling state of revenues of the Federal Government and almost all states, MSMEs must know that it may no longer be business as usual.

Nigerian MSMEs are overburdened by taxes as economy piles more pressure on them.

They are also hard hit by continued poor infrastructure and technology, which have become obvious barriers and prevented them from creating good jobs for Nigerians.

“I can tell you that in the last 14 months, taxes have increased from 39 to 57. Nine taxes are from the federal, 21 from states and 27 from local governments,” said Yinka Oyinlola, CEO, Nigeria Leadership Initiative at the FATE Foundation Dialogue Series held recently in Lagos.

Multiplication of taxes has continued to pose serious challenges to start-ups and small businesses as there is yet no harmony in taxation among the three tiers of government.

Mahmud Othman, council member of LCCI and consultant for AG Leventis, told Start-Up Digest recently that it was laughable that local government authorities would visit public liability firms, demanding irrelevant charges such as radio and television fees.

“The problem is that once you challenge them, they go to customary court. Decree No 21of 1998 spells out taxes payable to each level of government.   Most of the taxes they collect today are illegal. There is a provision for a local government, because of its peculiarity, to come up with a specific levy. But due to indiscipline, local governments come up with all forms of taxes,” Othman said in an interview.

ODINAKA ANUDU