As Nigeria’s revenue generation dips further due to shortfalls in the oil sector, the federal government has been banking on taxation to save its purse from being completely empty.
This has resulted in multiple taxation with new taxes being introduced and VAT being increased. At the receiving end of the increasing taxation is the private sector.
Against this backdrop, a member of the Organized Private Sector of Nigeria (OPSN) has advised the federal government not to overburden the real sector operators with further taxes and stringent regulatory policies.
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Adewale-Smatt Oyerinde, the Director General of the Nigeria Employers’ Consultative Association (NECA), gave this advice on Sunday through a statement titled; “Beyond Rhetoric: NECA Calls for Urgent Action to Save the Real Sector.”
In his statement, Oyerinde urged the government not to overburden businesses in the private sector in its attempt to generate revenue to fund the 2023 budget and liquidate interest accruing on debts.
“It is in the best interest of government to protect the real sector rather than tax it out of existence… debt and paucity of revenue are challenges that are acknowledged, organized businesses should not be made to suffer the lack of proper economic planning and political will that have pervaded successive administrations.
“At the last count, organized businesses are presently faced with over 50 different taxes, levies and fees at all tiers of government, some of which are duplicated,” he said.
In July, the federal government had moved to introduce 5% tax on telecom services, including calls, SMS and data. The move, which was vehemently opposed by stakeholders in the industry and members of the Nigerian public, underscores government’s determination to switch to taxes as its main source of revenue generation.
Oyerinde said, “currently, at the National Assembly, there are over five different bills, which seek to impose various taxes and levies on organized businesses in addition to the notable taxes and levies, which are of general application, such as The National Information Technology Development Levy (NITDA Levy), Education Tax (or Tertiary Education Tax), National Social Insurance Trust Fund (NSITF), Company Income Tax (“CIT”), Television and Radio License Fee, Local Content Levy, Stamp duty, among others.
“While taxes are global phenomenon, governments all over the world seek to protect their most productive sectors rather than tax them out of existence.”
Nigeria’s economic crisis has eaten deep into every sector, creating a huge revenue vacuum that the government is helplessly trying to fill. With the oil sector’s underperformance even in the face of oil windfall that could have served as succor to the country’s financial setbacks, the government is focusing on the real sector, which appears to be performing better than other sectors.
But NECA, like others, is concerned that the government’s focus on the real sector will impact businesses negatively.
“At a time when government should do all that is necessary to protect businesses from total collapse and reduce the increasing unemployment rate, there are proposals to further increase excise tax on select products, including the spirits, alcoholic and non-alcoholic products.
“This action will not only reduce the competitiveness of the industries but will also increase the costs of doing businesses and further reduce their potential sustainability,” Oyerinde said.
He added that “it is in the best interest of government to protect the real sector rather than tax it out of existence.
“As the AfCFTA comes into full swing, Nigeria cannot afford to become a dumping ground for cheap imported products because we have refused to protect local businesses.
“Over the years, we have urged government to expand the tax net, take a bold step towards stopping the oil-theft industry, take more than a cursory look at national assets that are laying waste and address the national embarrassment called the petrol subsidy regime.”
The major factor in Nigeria’s revenue crisis is the fuel subsidy, which is tied to non-functioning refineries and has been gulping a huge part of the national budgets. In 2023 alone, the subsidy is projected to consume N6.7 trillion from the budget, a large depletion of resources meant for capital expenditures.
Oyerinde said that local businesses should not be punished for the inconsistencies of the government.
“There is no justification why the nation’s four refineries are still moribund after many Turn-Around-Maintenances.
“It will be counter-productive for government to continue tightening the noose on legitimate businesses that are contributing to national growth while there exist obvious wastages and inefficiency in government that are yet unattended to.
“As a panacea to the ever reducing Foreign Direct Investments, rising unemployment and multi-facet revenue challenges, government and its agencies must protect local businesses and make the operating environment more hospitable,” he said.
Nigeria’s inflation rate hits 20.52% in August, the highest in 17 years. The recent rise is attributed to forex scarcity and the rising cost of diesel that forced businesses to either shutdown or hike the cost of their goods and services.
Oyerinde said all these, in addition to the stringent regulatory environment and non-alignment of fiscal and monetary policies, are already stalling economic growth in Nigeria. He said these, together with excess borrowing, have set the country up to self-inflicted revenue challenges.
“Even with the nation’s current level of indebtedness, the government is still poised to borrow over N11 trillion to finance the 2023 national budget. Currently, the government had made a cumulative expenditure proposal of over N19 trillion in the 2023 national budget, a 15.4% increase over the 2022 estimate,” he said.
NECA is just one among many stakeholders in Nigeria’s private sector that have called on the government to ease its tax imposition on businesses. But the government has appeared helpless in the face of challenges stymieing its revenue generation, narrowing its choices to taxes and borrowing.