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Businesses heading for total collapse, NECA raises alarm

Businesses heading for total collapse, NECA raises alarm

lSays over 50 taxes weighing businesses down, warns against further borrowing lAs FIRS calls for harmonised tax

systemlEconomy facing many vulnerabilities — Muda Yusuf

The Nigeria Employers’ Consultative Association, NECA, has hinted that most businesses in Nigeria are now on the brink of collapse under the pressures from the economic policy environment.

In a statement in Abuja yesterday, NECA lamented that at the last count, organized businesses are presently faced with over fifty different taxes, levies and fees at all tiers of government, some of which are duplicated.

The umbrella body for employers and the voice of businesses in the country, equally cautioned the Federal Government against further borrowing, contending that the nation is faced with acute and self-inflicted revenue challenges and a rising debt profile, among many other economic headwinds.

They noted with dismay that 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.

NECA stated: “Organized businesses have witnessed varied challenges in recent months. From shortage of FOREX, stringent regulatory environment to non-alignment of fiscal and monetary policies, which when combined makes doing business difficult.

“It is obvious to all discerning stakeholders that the nation is faced with acute and self-inflicted revenue challenges and a rising debt profile, among many others. 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 percent increase over the 2022 estimate. While it is necessary and critical to generate revenue to fund not only the 2023 national budget but also to liquidate the interests accruing on the debts, Government will do well not to further burden the Real sector with additional taxes and stringent regulatory environment”

Articulating factors that were already crushing organized businesses, NECA’s Director-General, Mr Adewale-Smatt Oyerinde stated that “while 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.

Businesses face more than 50 taxes, levies, fees

“At the last count, organized businesses are presently faced with over fifty different taxes, levies and fees at all tiers of Government, some of which are duplicated.

“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.

“It is strange that 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 cost of doing businesses and further reduce the potential sustainability”.

While emphasizing the need for Government not to over-burden Enterprises and also making recommendations on ways out of the debt and revenue quagmire, Oyerinde stated 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.

“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 yet unattended to.

“As a panacea to the ever reducing Direct Foreign Investment, rising unemployment and multi-facet revenue challenges, Government and its Agencies must protect local businesses and make the operating environment more hospitable.”

Economy facing many vulnerabilities – Muda Yusuf

Speaking to Financial Vanguard on the current state of organised businesses Nigeria, the Chief Executive, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said: “Over the past one year, the Nigerian economic environment has been characterized by numerous vulnerabilities.

These include: Unprecedented surge in energy prices which had a very huge adverse effect on economic players across all sectors, unprecedented level of currency depreciation and currency volatility; soaring inflation leading to depressed purchasing power; low industrial capacity utilization; increasingly weak fiscal space, characterized by dwindling revenue and growing expenditure and acute foreign exchange scarcity with profound effects on investors across all sectors.”

Yusuf who was the immediate past Director General, Lagos Chamber of Commerce and Industry, LCCI, added, “All these headwinds have had devastating effects on businesses. However, the economy continues to demonstrate resilience amid these harsh investment environments”.

Amongst the list of the solutions to these challenges,    Yusuf said: “Government has to reduce the cost of governance and addressing the problem of leakages in government, with improvement in tax administration, the effective oversight on revenue generating MDAs to boost independent revenue.

“Also they should focus on the use of debt to strengthen the capacity of the economy to be productive, especially greater emphasis on infrastructure spending and improve business environment to boost investment and ultimately boost government revenue.

“They should tackle oil theft and deepen stakeholder engagement and fixing refineries to put an end to fuel subsidy and the associated leakages. Budget benchmark for exchange rate should be reviewed upwards”.

Let there be tax harmony – FIRS boss

Appearing before the Senate Public Hearing on the 2023 Medium Term Economic Framework (MTEF), last week,     the Executive Chairman of the Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami, condemned the existence of what he called “fragmented tax systems and agencies.”

He stated: “In Nigeria we have 774 Local Governments, each of them have a tax authority; each of the 36 States, too, have revenue authorities with their respective mandates; then we have the FIRS and Customs. What I would advise for efficiency and to do things in line with global best practices, is that we should amend our tax laws to harmonise the tax agencies and tax system.

“With this, when the FIRS, for instance visits ‘Company A,’ it can serve one assessment on the company, and also on the individual that owns the Company; it can also ask the company to account for the VAT it has collected, and ask for PAYE it has deducted from its employees as well as the Personal Income Tax of the Promoters of the Company.

“This is currently not the case, and as such has created a huge gap in our tax system.”

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