Multiple taxation, bill hike and salary cuts are fast becoming the new normal to business owners and workers in Nigeria. This was further compounded by the economic effects of the COVID-19 pandemic, slowing turnover level of businesses and affecting the income level of individuals, amidst job losses.
Despite the hit from the pandemic, scores of workers and entrepreneurs who spoke to Daily Trust Saturday have decried the unabated rise in ‘forced’ taxes being levied on their struggling businesses. They also lamented the effects of these tariffs on their pockets as their residual and business income have declined in the last four months rather than appreciate. In February 2020, the Federal Government raised the VAT from 5 percent to 7.5 percent.
The 11 electricity Distribution Companies (DisCos) immediately activated that on the bills of over 10 million registered electricity users. Despite this, the Nigerian Electricity Regulatory Commission (NERC) was to increase electricity tariff by over 50 percent in April but was cut short due to the COVID-19 emergence.
It tried that again in July but met resistance from the National Assembly; it’s been suspended till 2021. However, NERC increased the cost of buying meters by consumers who are already crying over high and unfair bills. The regulator justified this, saying meter providers and the DisCos had faced forex and inflation rise with a single phase meter now selling for N48,263 while three phase is N89,069.
A proposed two months free electricity for Nigeria by the National Assembly to cushion the pandemic effect on power tariffs was jettisoned over bleak implementation means. Levies, bills pressing us harder – Workers A microfinance banker in Lagos, Mr. Aderemi Oluyemi, said the government was insensitive to the plight of the people especially during COVID-19 when it is supposed to give palliatives to the people and that its action was putting pressure on the economy.
“For the past four months, there has been 20 percent cut from my salary, yet the government is increasing the burden. Even the prices of food items are rising day by day, cost of transportation in Lagos is very high particularly with the social distancing directive of the government,” Oluyemi said.
A staff of Air Peace airline, Mr. Kabiru Ojo, said he suffered over 40 percent pay cut as a result of COVID-19 pandemic, and can’t meet up with his responsibilities. However, rising taxes and tariffs stare him in the face. A journalist, Biola Yusuf, said his national newspaper was affected. “I have no salary from my employer, yet we work round the clock and we have families and ourselves to cater for.
It is really a terrible situation,” she lamented. An Abuja-based Agribusiness Intervention worker, Damilare Agbele, lamented the impact of multiple taxation on his overall earning amidst the COVID-19 pandemic. “My salary is primarily taxed (without any evident socio-infrastructure benefit enjoyed).
I pay VAT on items purchased and services procured. Banks charge stamp duties on transactions and other unexplainable deductions on transactions,” he said. Agbele also said prices of products and services (food and transportation especially) have increased considerably and at the end of the day, one is left with almost nothing to live on.
On coping with salary cuts, an aviation sector worker, Arhel Hena, said he got 80 percent salary cut due to COVID-19 effects. “I also had to manage to pay my rent which was due in May. I would have been out there with people. It wasn’t funny at all. Aviation is the worst hit, as I know some companies that are also struggling to pay a token to their staff,” he said.
Business owners share pains Another group of people impacted by multiple taxation is the Micro Small and Medium Enterprises (MSMEs) especially as President Muhammadu Buhari signed the Finance Bill in February which, among others increased the Value Added Tax (VAT) from five per cent to 7.5 percent.
A 2020 survey released in June on over 1,600 Small and Medium Enterprises (SMEs) owners in 29 states revealed that the multiple taxes and levies remain a bane for tax-paying businesses in Nigeria, especially MSMEs. The PricewaterhouseCoopers (PwC) survey showed that 49% of SMEs pay 20 to 40 percent of their income or profits on taxes and levies, while 28 percent of businesses pointed out that the Local government charges, taxes and levies were the most difficult to comply with.
The survey covered over 1600 business owners across 29 states. A shoemaker and CEO of Shoespeed Interglobal Services Limited in Lagos, Abiodun Folawiyo, said in developed countries like Italy where SMEs have electricity, good roads, access to funding and more, people do not mind when government charge exorbitant taxes because entrepreneurs know what government will do with it. “But in Nigeria, the money they collect from us, you hear that someone stole N30 billion. So, the tax they collect is not being translated to good use to provide infrastructure.” Folawiyo said the government should give SMEs tax holiday instead.
“They should declare a tax holiday for us and not tax us. Government should make Ease of Doing Business more attractive for us and foreign investors.” The CEO of Dolphin Restaurant and Catering Services, Nneka Agbo, said consumers feel the impact of any tax. “Basically, when we pay more taxes, the increment will directly be transferred to customers such that it will impact on their perceived earnings and savings.
However, the downturn for registered businesses such as ours will be that customers will now prefer to patronise substandard and unregistered eateries.” COVID-19: CBN intervenes with N1trn, effects persist The aggregate interventions from the Central Bank of Nigeria (CBN) in the wake of COVID-19 outbreak is N1.15 trillion from which it has disbursed N295.7 billion to manufacturers, the health care sector, the SMEs and the households.
These interventions comprised the N50bn Household and SME facility, the N100bn healthcare and N1tn manufacturing and agricultural interventions to support the rebound in growth from the impacts of the pandemic on the economy.
There is also the CBN coordinated CA-COVID – Private sector intervention scheme – which mobilized over N32bn to support the economy, lives and livelihoods. Despite this, our survey shows the effects of the pandemic reflected in multiple taxation, salary cuts still persist. Entrepreneurs, experts condemn incessant levies Experts, manufacturers and other stakeholders in the Nigerian economy have condemned the incessant levies amidst the COVID-19 pandemic.
Most of them believe that key taxation that impales the pockets of Nigerians should have been shelved off during the pandemic until economic activities fully recover. Mr. David Aku, an Economist based in Enugu said it made no sense troubling citizens with so much taxes, levies charges, stamp duties and so on during a pandemic where the purchasing power is crippling. He also urged the FIRS to suspend the six percent stamp duty on tenancy agreement till 2021 when the economy is projected to recover.
The National Coordinator, Progressive Shareholders Association of Nigeria, Boniface Okezie, said the tax system depletes returns on investment and subsequently triggers business collapse. The Association of Bureaux De Change Operators of Nigeria (ABCON) in its Quarterly Economic Review for Q2 of 2020, called on the Federal Government to suspend all increases in taxation and tariffs until the economy recovers from the impact of the COVID-19 pandemic.
While it commended the suspension of the planned tariff hike, ABCON urged that the same decision should be extended to other taxes. The embarrassing ways some of the taxation laws are enforced are the concern of the Manufacturers Association of Nigeria (MAN). The association said these taxes are characterized by the use of stickers, mounting of roadblocks, use of revenue Agents/Consultants including motor-park touts.
The Acting Director General of MAN, Ambrose Oruche said: “We have situations where a taxpayer is faced with demands from two or more different levels of government for the same or similar taxes. “A good example here is the administration of the VAT and Sales Tax simultaneously.
The same level of government imposes two or more taxes on the same tax base like the Companies Income Tax, Education Tax and Technology Levy by the same company,” he said. Samson Simon Galadima, a Financial Economist, said the government has been angling for ways to shore up its revenue even before the salary cut. “That’s how the Finance Act came about; however, the fall in the price of crude oil on the international market has made it the more urgent. Furthermore, the coronavirus-induced recession has worsened things.
”Also, Muhammad Ali, an Economics Lecturer at Prince Abubakar Audu University, Anyigba, Kogi State, said revenue generation was receiving negative shock arising from the effect of the pandemic. Ali called on the government to impose more tax on luxury items as this would not have an effect on prices of commodities that are necessities or goods and services that are mostly consumed by the poor masses.
On her part, SME Consultant and DG of Global Centre for Human Development and Entrepreneurship Development (GLOCHEED), Rose D. Gyar, said the government should not always rush to impose tax, instead it should block leakages. “This will positively impact on tax collections rather than impositions that would possibly lead to closure of businesses and subsequently increase the number of unemployment,” Gyar said.
The Federal Inland Revenue Services (FIRS) had introduced a hike in VAT, stamp duty on tenancy pact, among others. The agency did not respond to this paper’s enquiry on the tax rebate it would provide for SMEs and other affected sectors of the economy. The Director of Communication of the Service, Abdullahi Ahmad, promised to get back to our reporter but did not a day before this report was filed.
