The directive to banks by the Federal Inland Revenue Service (FIRS) to tamper with the accounts of some firms over tax defaults has again been deplored by Lagos Chamber of Commerce and Industry (LCCI). Taiwo Hassan reports
Last year, Nigeria was ranked 146th by the World Bank Ease of Doing Business, an indication that the cost of doing business is still high.
Indeed, the country’s business environment is still perverse with over regulation, multiple taxes and levies, which inhibit investment and economic activities, particularly in the manufacturing sector.
Technically, the resultant negative effect of multiple taxes on the overall economic ambience is already colossal for an economy whose current growth rate is still fragile.
Nevertheless, government believes that no matter the economic challenges confronting businesses in the country, Nigeria remains an investment haven in Africa considering the high return of investment, market size and growing middle class.
However, one of the major challenges hindering growth and development of businesses in Nigeria is that of over regulation and multiple taxes and levies on operating companies.
Members of the Organised Private Sector (OPS), comprising the Manufacturers Association of Nigeria (MAN), Nigeria Employers’ Consultative Association (NECA), Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Nigeria Association of Small Scale Industries (NASSI) and Nigeria Association of Small and Medium Enterprises (NASME), have been complaining that the government agencies saddled with tax collection responsibilities have been putting more pressure on them in a bid to drive revenue.
The OPS is an advocacy group that has been championing the welfare of private sector operators with the aim of ensuring smooth trade facilitation for its members without hindrances from regulatory agencies.
In any industrialised economy, the micro, small and medium enterprises (MSMEs) have the potential to greatly enhance the tax revenue profile of the country if adequately harnessed.
Basically, the strategies for optimising the contribution of MSMEs to the country’s tax revenue profile are critical towards measuring the growth and development of the country’s economy.
That is why tax is centered on the contribution of MSMEs to Gross Domestic Product (GDP) national export and tax collection.
However, there are always challenges impeding the optimisation of MSMEs’ contribution to tax revenue and this is the reason tax collectors beam searchlight on tax defaulters in the system, who are mostly SMEs operators.
In Nigeria’s context, when adequately harnessed, MSMEs can have much impact on the profile tax revenue for the country, especially considering their direct correlation with personal income tax, value-added tax and withholding taxes.
MSMEs are classified into micro enterprises, small enterprises and medium enterprises.
The most recent survey conducted by the National Bureau of Statistics (NBS), in partnership with the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), put the number of MSMEs in Nigeria at 97 million.
With this SMEs population in place, government tax agencies have been beaming light on operators to ensure that tax collection is made into government’s coffers without bothering to know the challenges confronting MSMEs in the country.
Based on this precinct, operating businesses in Nigeria have been tough in all ramifications.
However, findings show that the challenges impeding the optimisation of MSMEs’ contribution to tax revenue in Nigeria include poor record-keeping and information management, inability to distinguish personal capital from business money, low awareness of Nigerian tax laws and, little or no business research leading to close of business.
Meanwhile, the Council of the Lagos Chamber of Commerce and industry (LCCI) at its first meeting in 2019 in Lagos recently deliberated on a range of business and economic issues facing manufacturers with the aim of resolving them.
One of the critical issues deliberated upon was the effect of freezing corporate bodies’ bank accounts by FIRS due to tax defaults.
This move, LCCI noted, was premised on the powers conferred on the FIRS by section 31 of the FIRS Act, which gives FIRS the powers to appoint collection agents for the recovery of tax payable by the taxpayer.
The Council affirmed that LCCI was a strong proponent of regulatory compliance by private sector players.
However, it is important to underscore the fact that tax administration should be in consonance with the basic tenets of the rule of law and the fundamental principles of a good tax system.
It stated that tax administration should be consistent with the principles of equity, fairness, legality, accountability and due process.
LCCI insisted that taxpayers should be given ample opportunity to defend their positions on tax matters before a lien is placed on their bank accounts.
“There are instances where company accounts were frozen in error because there was no proper engagement, documentation or communication with the tax payers.
“The disruptions to businesses resulting from a sudden freezing of bank accounts for reasons of alleged default in tax payment has caused irreparable reputational damage to many businesses,” the chamber said in the communique.
In light of the foregoing, LCCI urged the FIRS and the banks to exercise utmost restraint in the adoption of this tax revenue recovery strategy because of the grave implications for investors, financial inclusion and the economy as a whole.
The damage to the economy may be much more than the contemplated revenue.
Revenue generation is not an end in itself; it is a means to an end. The ultimate objective is to ensure equity, improve welfare of citizens, create jobs and promote the advancement of the economy. The activities of agencies of government should be in tandem with the Ease of Doing Business Agenda of government and the promotion of the ideals of the Economic Recovery and Growth Plan (ERGP).
To remedy the situation, the Executive Chairman of the Federal Inland Revenue Service (FIRS), Mr. Babatunde Fowler, while reacting to the matter, said that the Service has deployed adequate man-power to promptly attend to all tax related challenges by MSMEs.
He also recommended that respective organs of government saddled with disbursement and utilisation of tax revenue should endeavour to be transparent and ensure accountability in order to motivate voluntary tax compliance by the MSMEs.
In addition, he called on governments at all levels to endeavour to provide infrastructural facilities and enabling business environment to allow MSME businesses to thrive.
Of late, there have been frequent clashes between the OPS and FIRS on economic issues bordering on enabling environment.
Although acting within its mandate, truth is that FIRS needs to take it easy to give room to SMES and other corporate bodies to grow.]]>
Practical Considerations to Negotiate an Enforceable Joint Operating Agreement in Civil Law Jurisdictions (Netherlands: Kluwer Law International, 2020) By Professor Damilola S. Olawuyi, LL. B (1st Class), BL (1st Class), LL.M (Calgary), LL.M (Harvard), DPhil (Oxford), Professor of Law and Deputy Vice-Chancellor, Afe Babalola University, Ado Ekiti, Nigeria, www.damilolaolawuyi.com. & Professor Eduardo G. Pereira, LL. B (Brazil), LL.M (Aberdeen), PhD (Aberdeen),www.eduardogpereira.com
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