Addressing Multiplicity Of Taxes On MSMEs

Businesses within the Micro, Small and Medium Enterprises (MSMEs) sector of the nation’s economy are grappling with multiple taxation that is hampering their growth. 

Hence, stakeholders have called on government at all levels to hamonise their taxes to lift the burden of taxes on these businesses.

Checks by LEADERSHIP revealed that this development is affecting the growth of Small and Medium Enterprises(SMEs) in Nigeria as many operators of these businesses expressed their unwillingness to venture into new enterprises or expand the existing ones for fear of multiple taxes.

Indeed, a vast number of MSMEs are not properly captured with official tax receipts as records showed that many of the MSMEs operators do not comply with tax payment, while those who pay are exposed to multiplicity of taxes thereby killing business vendors who fall within the line of tax payment.

Experts believe that tax payment for SMEs was lopsided as it does not properly capture the statistics of businesses operating within the country’s SMEs subsector.

Particularly, official tax receipts for the SMEs, private corporations and sole proprietorship business provides a business with legitimacy and approval from the Corporate Affairs Commission to properly audit businesses while offering advisory support and corporate governance to MSMEs.

Obviously, lack of proper tax identification number pose great challenges to the government in identifying the numbers and challenges of SMEs operating within the ecosystem who in turn may need financial aid, interventions, grants and incentives to boost their businesses.

Speaking on this, national president of Association of Small Business owners of Nigeria (ASBON), Dr. Femi Egbesola said, stakeholders in the Small and Medium Enterprises (SMEs) sector should call on the government to take urgent steps to bring sanity into the tax administration of the country. 

This, he stressed, is to avert the total collapse of the economy due to tax suffocation of businesses, adding that, multiple taxations have affected the operations of many companies negatively, and as such, arousing criticisms.

According to him, “the multiple tax system depletes returns on investment, erodes working capital of listed firms, and subsequently triggers businesses to collapse while adding that this largely undermines efforts by capital market regulators to woo more companies to list their shares in the market, a move that will make investors access many investment opportunities and deepen the market.”

Confirming this to LEADERSHIP at CISLAC Stakeholders capacity building and consultative workshop on fiscal support for MSMEs and private corporations, executive director of CISLAC, Auwal Ibrahim Musa, reiterated the need for improved tax audits for small and medium enterprises and private corporation, stating that, SMEs are major contributors to job creation, revenue sources and trade expansion.

CISLAC boss explained that the move to file tax identification number (TIN) and tax returns for SMEs would bolster the economic livelihoods of businesses with the obligation to block leakages of multiple taxation and keep proper documentation of accounting records of daily business transactions.

This, he said, would provide alternative financing instruments needed to secure funding and strengthen platforms for SMEs government interface for fiscal support and mutual growth opportunities. 

Speaking on CAMA Acts, Auwal Ibrahim said, following the national tax policy, SMEs and small-scale companies whose turnovers are below N25 million and below are exempted from paying taxes for a period of time.

The CISLAC director said, despite efforts and interventions of CBN, NIRSAL, Nexim, BOI, AfDB, SMEDAN and other agencies who have set up offices across the 36 states to assist the SMEs, access to finance was a major obstacle for SMEs.

He said, less than five per cent of Nigerian SMEs have been able to access adequate financing as working capital for funding business growth and expansion.

He hinted that the N617.3 billion funding gap in the MSMEs sector has prevented the country’s MSMEs from realising their full potentials.

This is even as the MSMEs stakeholders highlighted the challenges facing their operations which include, multiple taxes, regulatory challenges, informal structures, lack of coordination of federal & state agencies and the absence of a central technology platform for the ease of payment of taxes, amongst others.

Senior manager, Federal Inland Revenue Service, (FIRS), Dr. Iheme Madukairo, said, tax audits for MSMEs will provide leverage for businesses to give accountability for paid taxes while improving the landscape of MSMEs and private corporations to block income leakages, multiple taxation and track the computational level of growth on company income.

Iheme stated that NIN registration, for instance, was made compulsory for SMEs business registration in the country to ensure a transparent system for tracking the significant number of legitimate business operating formally in the SMEs subsector.

He identified some of the challenges and bottlenecks that hampers incentives and financial support facilities to SMEs such as tax clearance certificate, tax audits, tax investigation, business registration SMEs desk examination, bank statements, value-added tax returns filing, record keeping and company income tax filing returns.

Speaking on the CAC Registration, he averred that businesses with Corporate Affairs Commission registration  are expected to register with the Federal Inland Revenue Service(FIRS) to validate it’s Tax Identification Number (TIN) obtained at the CAC at relevant tax office.

Similarly, Program manager- Tax Justice, Environment and Conservation of Nature, CISLAC, Mr. Chinedu Bassey cited a 2020 MSME survey by PwC which also highlighted multiple taxation and regulatory challenges.

He, therefore, advocated for improved civic advocacy to improve access to finance for small business growth/expansion, and also help to build capacity for SMEs on relevant statutory requirements, legal and policy frameworks.

Also speaking, National deputy president, Southern region, NASME, Mrs. Gbemi Oduntan, stated that, the Tax Identification Number(TIN) and Tax filing returns for SMEs would reprogramme the sector and will afford stakeholders to proffer solution to some of the challenges bedevilling SMEs.

National secretary, Association of Nigeria Women Business Networks (ANWBA), Mrs. Olakitan Wellington, noted that, there is a lot of financial support provided by the government for MSMEs, but could not be accessed due to difficulties in proper documentation processes and Tax Identification Number for SMEs.

Olakitan asserted that, this will go a long way in bringing exposures to SMEs on the right ways to access support funds for both the government and international organisations.