By AYOOLA OLAOLUWA
Many Nigerians companies, as well as millions of individuals, especially the unemployed and low-income earners, are at the brink of bankruptcy as the Federal Government ramped up its revenue drive, Business Hallmark findings have shown.
In its desperation to generate more revenue to compensate for the ever rising fuel subsidy and huge losses to oil theft, the Federal Government had escalated its revenue drive, especially tax generation, in a move to cover the gap.
President Buhari had on January 13, 2020, signed into law the Finance Bill 2019. The new act amended the Customs and Excise Tariff Tax Act, the Petroleum Profit Tax Act, the Company Income Tax Act (CITA), the Personal Income Tax Act (PITA), the Value Added Tax (VAT) Act, the Stamp Duty Act and the Capital Gains Tax (CGT) Act in order to enhance their revenue generation potential for the country.
According to the body in charge of tax regulations in Nigeria, the Federal Inland Revenue Service (FIRS), there are nine types of taxes in the country.
They are: Companies Income Taxes; Value Added Taxes; Withholding Taxes; Petroleum Profits Taxes; Personal Income Taxes; Stamp Duties; Capital Gains Taxes; National Information Technology Development Levy and Tertiary Education Taxes.
However, BH findings revealed that apart from these nine statutory taxes collected by the FIRS, there are over 200 taxes currently being collected by federal, states and local governments agencies from companies operating in the country which they (firms) don’t get commensurate value for.
These taxes include but not limited to the waste treatment charge (paid by firms operating in Lagos); 1kobo telecommunications tax; advert and signage levies; right of way charges; radio and television charges; business premises levy; National Health Insurance Levy; Nigeria Police Trust Fund Levy, as well as the recently introduced N10 per litre sugar tax on carbonated sugar drinks and beverages and several others.
From February 2020, the government began giving impetus to its non-oil revenue generation drive by introducing several measures, including the implementation of the revised Value Added Tax at 7.5%, increase in import duties paid on imported equipments, as well as new tariffs on electricity consumption, removal of fuel and electricity subsidies, among many others.
The introduction of the levies has pushed up the cost of production of goods and services. For instance, with the coming of the health insurance levy, calls and data services, Nigerians now pay about 20 kobo on every calls made, up from about 11kobo per second it used to be. The new tax translates to a 9 per cent tax on GSM calls.
Also, the sum N5.61 is now charged on every SMS sent, instead of the former rate of N4. This translates to an increase of N1.61.
Before the Federal Government’s announcement of the new tax, GSM operators under the aegis of the Association of Licensed Telecommunication Operators of Nigeria, had proposed a 40 per cent increase in the cost of calls, SMS, and data as a result of the rising cost of operating in the nation.
When the proposal is eventually implemented, Nigerians will be paying a minimum of 49 percent tax on all data, calls and SMS they initiated on the phones.
The new levy came after the Federal Government slammed a N10 tax on every litre of all non-alcoholic, carbonated and sweetened beverages drinks produced in the country.
For instance, BH checks revealed that the cost of a 50cl bottle of popular soft drinks like Fanta, Coca Cola, Sprite, Pepsi Cola and Mirinda which sold for N150 between January and March 2022, now goes for between N200 and N250 across the nation. A 50cl bottle of Coca Cola is sold in most parts of Lagos at the rate of N200.
Findings revealed that owing to the rise in the prices of soft drinks, many Nigerians have abandoned the commodity.
Bothered by the sharp drop in sales and revenue, bottling companies, findings revealed, have been forced to repackage the drinks into smaller bottles.For instance, the smaller 35cl bottle is now more in the market and it goes for N100.
A staff of the Nigerian Bottling Company who spoke with our correspondent on the condition of anonymity, said the decision to reduce content and price was more of a survival strategy.
“A large bulk of our products taken out by salespersons are often returned as unsold. Also, distributors are no longer booking large quantities as before.
“So, the management made a decision to reduce the bottle, content and price to N100 in order to drive sales”, the staff noted.
He, however, noted that several plants owned by the bottling plant across the country had either been closed or now operate below capacity.
Nigerian businesses and individuals are also grappling with the stamp duty charge. According to the act establishing the levy, a stamp duty of N50 is paid on every transaction of N10,000 and above. While the amount seems small, several firms and individuals have complained that they were deducted daily, depending on the volume of transactions they made.
A leading financial institution, Access Bank, had in the thick of Covid19 lockdown in 2020 reversed the deductions made on stamp duties for the months of March and April after an uproar.
The bank, while apologising to its customers, promised to reverse the deductions and bear the cost for the two months. It then informed customers that proper deductions will start from May 2020.
While Nigerians were still grappling with the hardship brought about by the implementation of the stamp duty regime, the government added Certificate of Occupancy, insurance policies, Guarantors form, memorandum of understanding and tenancy agreements to the taxable lists.
With this new policy, all documents pertaining to rent or lease agreements for homes or offices, C of O, as well as other business-related instruments are subjected to authentication with the new FIRS Adhesive Stamp duty.
“The following are the chargeable transactions in the Fixed Duty Instruments category, Power of Attorney; Certificate of Occupancy, Proxy form; Appointment of Receiver, Memorandum of Understanding, Joint Venture Agreements, Guarantor’s form, and Ordinary Agreements Receipts.
“While ad-Valorem Instruments chargeable under the Stamp Duties Act are Deed of Assignment, Sales Agreement, Legal Mortgage or Debentures, Tenancy or Lease Agreement, Insurance Policies, Contract Agreements, Vending Agreement, Promissory Notes, Charter-Party and Contract Notes”, the service explained.
Also affected is the stock market as investors and operators now pay more as transaction cost for shares traded on the Nigerian Stock Exchange.
From February 1, 2020, the cost of transaction in the stock market increased as follows: Sell side- Stockbrokers fee 1.46 percent from 1.42 percent; NSE fee 0.33 percent from 0.32 percent; Central Securities Clearing System and Trade Alert fee 0.39 percent from 0.38 percent.
On the Buy side: Securities and Exchange Commission fee 0.33 percent from 0.32 percent; CSCS Trade Alert and VAT Alert fee 0.07 percent from 0.06 percent and Brokerage fee 1.46 percent from N1.42 percent.
Overall, there was an increase of 0.12 percent for both the Buy and Sell side after the 2.5 percent.
Electricity consumers were also not left out. For instance, the government increased the duty payable on imported pre-paid meters from 10% to 45%.
Still grappling with challenges brought about by the hike in tariff rates and levies, Nigerians also woke up to the announcement that the Passenger Service Charge for air travellers had been raised.
With the development, air passangers now pay a new PSC of N2000, up from N1000 for domestic flight operations and $1,000, instead of the old rate of $500 for international passengers.
The new rate led to further increase in air fare by airlines on both routes, making air travel more expensive in the country at a time many Nigerians find it difficult to travel by road owing to insecurity.
The implementation of the Finance Act has exacerbated the attendant burden on businesses and individuals, with many companies closing shops and many of those still in operations scaling down operations.
For instance, since the start of implementation of the new tax regimes, the monthly inflation index had gone up. It had also contributed to the decline in the nation’s GDP growth rate as Nigerians continue to lower their consumption rate in the face of shrinking disposable income. The effect is that inventories are pilling in manufacturers warehouses and shelfs.
In spite of these multiple taxes and levies, the government is not yet done as it is still mulling the idea of reintroducing toll gates on federal and states roads, among several belt-tightening measures, forcing experts to voice concerns of imminent destabilization of the fragile socio-economic system.
Speaking on the development, the Chief Operating Officer of the Association Telecommunication Companies in Nigeria, Ajibola Olude, said telecoms operators are currently grappling with multiple taxation.
“The behaviour of the government is not helping things for anyone. As at today, we have about 36 levies and taxes against operators.
“An additional five percent came Into effect in June. All of these affect the sector, and that’s why we want the regulators to see that this is where we are”, Adebayo stated.
The Vice President, Manufacturers Association of Nigeria (MAN), Lagos Zone, Chief John Aluya, warned that multiple taxes creates a bad business ecosystem.
According to him, the extant law of the land-use charge confirmed a consolidation of all land-based laws and charges, but most member companies and even the association were being made to pay both land use charge and ground rent in Lagos. This is double taxation.
”Today, the central sewage has not been built by the Lagos State government, but we are being made to individually construct our effluent treatment plants and still pay the treatment charges to the state government without any value derived from the payment,” Aluya said.
The MAN boss advised the state government to implement policies that affect drop in productivity, citing a sharp decline in capacity utilisation for both Ikeja and Apapa Industrial zones which stood at 59 per cent and 64.2 per cent, respectively.
”The impoundment of trucks by the Lagos State committee on abandoned vehicles is highly disturbing.Trucks parked in front of the manufacturing facilities awaiting offloading their imported raw materials are being impounded as early as 6am and the companies are being subjected to pay fines for offenses they do not understand,” Aluya lamented.
Also speaking, the Deputy Managing Director of Royal Foam Products Nigeria Ltd, Mohammed Jibril, said that multiple taxation is killing businesses in Nigeria.
Jibril lamented that multiple taxation by government had killed many businesses which would h!ave boosted the economy and give employment to over 50% of Nigerian youths.
“The government should create enabling environment for people to go into businesses without fear of failure. For example a lot of people are afraid of tax.
“The level of tax on businesses in Nigeria currently is so high. There is need to grant tax holiday to infant companies coming in. Reducing taxation will help businesses to grow. The government should not be killing business with multiple taxes,” he said.
The Vice President of the Airlines Operations of Nigeria (AON), Chief Allen Onyema, also said that excessive taxations remain one of the major challenges preventing the air travel business in Nigeria from being a profitable venture.
“How can you pay about 37 charges in your own country? The modality rate on the airlines is alarming. Over 70 airlines have gone down.
“How will the airlines survive with multiple charges bringing us down? It is not all about the federal government. What about state governments where we operate from? They tax everything and that does not help us”, Onyema lamented.
In the same vein, the Chairman, Ogun State chapter of MAN, Saleem Adegunwa, called on the state government to harmonise the multiple taxes imposed on manufacturers in the state.
“The harmonisation of taxes and levies payable by manufacturers will aid our compliance and planning,” he said.