How Tax Burden Scares MSMEs from Registering Businesses

Most Micro, Small and Medium Enterprises (MSMEs) in Nigeria are scared of registering their businesses due to fear of tax burden, Prince Degun Agboade, President of Nigeria Association of Small and Medium Enterprises (NASME) has said. Agboade stated this yesterday, in Lagos, at the inaugural edition of the Vanguard Economic Forum Series focusing on MSMEs, with the theme, “The impact of Technology Adoption for Micro Small and Medium Enterprises in a Changing Tax Policy and Regulatory Environment”.

In order to facilitate the growth of the sector, he called on the Federal Government to come up with a new tax regime with specific template for MSMEs. He stated: “We need to look at the law; I agree that the tax agency cannot do anything outside the law but the law can be changed. I am an operator; I have a factory and employ people, when you talk about fees, levies and taxes, for God’s sake, who pays all of these? It is the operators.

“What I would say is that they should find a new tax regime, all the things they are using to set template that the large companies are using will not work. My suggestion is that we go for a new tax regime, and put it forward to the National Assembly. With a new tax regime, it would be easy to fix all MSMEs into one group in a box and then taxes would be collapsed for these set of people. We are not saying we would not pay but they should be collapsed into something that will make the MSMEs grow.”

In his contribution, Director General of Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, faulted the appointment of banks as tax collection agents by the Federal Inland Revenue Service (FIRS), while also charging the tax authorities to look beyond revenue drive in the pursuit of their mandate. According to him, “Section 31 of FIRS Act gives FIRS the power to appoint agents for the recovery of tax payable by the tax payer. Such an agent will be mandated to take any tax payable by the tax payer from any money earned by the agent on behalf of the tax payer.” “Some funds have been trapped in the bank as a result of this. I have a number of people whose money has been trapped because FIRS has instructed that no transaction should take place in their accounts with the banks. I don’t think it is right to appoint banks as collection agents.” Meanwhile, FIRS has said it is on course to achieve its target of collecting N6.75 Trillion in tax revenue in 2018.

This was disclosed by the Executive Chairman of FIRS, Mr. Babatunde Fowler, represented at the event by Mr. Syracuse Ekeji, Director/State Coordinator, FIRS, Lagos Island. He stated: “We are set to collect N6.75 Trillion for 2018. We have already achieved more than 60 percent of the target by first half of the year”. Fowler, however, noted that MSMEs’ contribution to tax collection has been very low, adding that average contribution of the sector between 2015 and 2018 was 6.9 percent.  “We collected tax of N4.027 Trillion in 2017. The contribution of MSMEs is on the average of 6.9 percent of the entire period of 2015-2018. Instead of increasing, it is going down,” he stated.

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