Stakeholders recommend 5-year tax holiday for SMEs

Stakeholders in the micro, small and medium enterprises (MSMEs) sector want the Federal Government to grant a minimum of five-year tax holiday to start-ups and extend amnesty to already existing businesses to enable them comply with relevant taxes.

The stakeholders said this would increase the survival rate of start-ups operating in the country, especially now that the economy is in recession.

“Five year tax holiday for start-ups should be utilised as a critical government policy initiative, which will promote a culture of entrepreneurship and increase their survival rate,” Ladi Jemi-Alade, executive member, Nigerian Association of Small and Medium Enterprises (NASME), said during an event tagged, ‘Public-Private Dialogue on Taxation for MSMEs’ held in Lagos.

“There should be extension of amnesty to existing small businesses. The government has given three years but we want an extension to 2016 as this would encourage compliance and help in reducing the number of businesses in the informal sector,” Jemi-Alade said.

The Federal Government gave small businesses a three-year tax holiday in 2013. This ended in 2015. The Federal Government currently reviews the Nigerian tax system, but stakeholders say the new tax system should exempt MSMEs from paying taxes in 2016 and 2017.

Available data show that SMEs and start-ups represent about 90 percent of the Nigerian manufacturing and industrial sector, but about 65 percent of these businesses fail within three years of starting.

The request by the stakeholders is contained in an advocacy paper prepared by NASME in collaboration with Delotitte, a taxation and audit firm, and with the support of Enhancing Nigerian Advocacy for a Better Environment (ENABLE2). Degun Agboade, president, Nigerian Association of Small and Medium Enterprises (NASME), said:

“It is our considered opinion that when the government develops a best fit-tax regime that meets the objectives of generating revenue while enabling economic growth via MSME success, we will be able to capture a lot of MSMEs into the tax net,” Agboade said.

Also speaking during the dialogue session, Larai Shuaibu, director, technical service department, Ministry of Finance, representing the finance minister, said the ministry is addressing and putting in place modalities for simplifying the country’s tax processes and reducing the tax burden on small businesses.

“The qualification for lower income tax rate applicable to small businesses should be reviewed in line with current economic realities,” Shuaibu said. “The income tax rate for small businesses should be further reduced as an incentive to encourage compliance and promote MSMEs. There should be a minimum threshold for VAT registration and compliance in order to protect micro businesses,” she added.

Babatunde Fowler, chairman, National Tax Policy Review Committe, said, “We are working on reducing tax rate for SMEs and before the end of the year the new tax rate will be disclosed.”

Josephine Okojie