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Multiple taxation is responsible for making Nigeria an undesirable ground for breeding healthy business and competitive practices
The Nigerian Communications Commission (NCC) has described multiple taxation as the factor responsible for business enterprises in Nigeria struggling to compete with their counterparts in other parts of the world.
Multiple taxation has also made Nigeria an undesirable ground for breeding healthy business and competitive practices thus weakening the country’s economic foundations, devaluing the symbol of her economic strength (the currency), and contracting the nation’s Gross Domestic Product (GDP).
The National Tax Policy 2017 defined Multiple Taxation as “the imposition of the same or similar taxes on the same income base, transaction, or person by one or more levels of Government, in one or more jurisdictions.”
The Policy warned that while a level of multiplicity is expected in a federal system of governance, “the levying of a particular tax on the same person/entity, in respect of the same liability by more than one State or Local Government Council should be avoided.”
Furthermore, the Policy emphasised the need to eradicate multiple taxations at all tiers of government, stating specifically that taxes similar to those being collected by a level of Government should not be introduced by the same or another level of Government. It also urged the Federal, State, and Local Governments to ensure collaboration in harmonising and eliminating multiple taxations.
But speaking in Ibadan, Oyo State at a Southwest Regional Stakeholders Workshop on Multiple Taxation and Regulations, NCC’s Executive Commissioner – Stakeholder Management, Mr. Adeleke Adewolu noted that the paradox of multiple taxation is that it does not lead to an increment in government revenue, rather the crippling effect of these taxes, makes otherwise profitable businesses, unprofitable.
According to Adewolu, “Multiple taxation negatively impacts the ease of doing business, shrinks the tax base, incentivizes tax evasion, and complicates tax compliance. In addition to these challenges, the economic burden of multiple taxation is further exacerbated by the administrative burden of complying with these taxes.”
Adewolu noted that despite the prospect of accelerated economic growth, the presence of multiple taxation, which the World Bank has termed ‘nuisance taxes’ has and continues to prove to be the bane of economic development in Nigeria.
The NCC Executive Commissioner insisted that though multiple taxation is an impediment to economic development, taxation, in and of itself, is a veritable tool for economic development and wondered why a fiscal tool such as taxation can become inimical to economic development.
“The curious question, that this workshop will attempt to answer, is how a fiscal tool for economic development like taxation can become inimical to economic development. It is imperative, therefore, to correct some misconceptions about taxation, particularly the misguided notion of taxation as a penal tool for thriving business enterprises,” he said.
Adewolu did not only reaffirm Nigeria’s position as Africa’s most populous country but also the largest economy on the Continent and therefore, was of the expectation that strong economic growth in Nigeria would generate substantial prospects for growth and spillovers for the whole West African region.
“Taxation is the backbone of public finance. It provides guaranteed and sustainable sources of funding for social programmes and public investments; it also serves as a tool curated by the government to distribute our commonwealth effectively and efficiently. It is thus evident that taxation is critical for making growth sustainable and equitable.
“Thus, taxation by design is an instrument for economic development and it is important to acknowledge and support the initiative of all tiers of Government in using taxation as an instrument for socio-economic development.
“However, supporting the tax initiatives by the various tiers of Government includes indicating where a category of taxes has become cancerous to economic development. These types of taxes typically manifest themselves in the form of multiple taxation and by design, they reverse growth, stifle innovation, and discourage investment. In parabolic terms, they are the scarecrows mounted by the government to disincentivize development,” Adewolu said.
While noting that the workshop provided the platform to rethink the country’s approach towards taxation by adhering to its founding principles, Adewolu listed those overarching principles of taxation to include neutrality, efficiency, certainty and simplicity, effectiveness and fairness, and flexibility.
He expressed optimism that the workshop would sufficiently clarify common mischief on taxation and provide a renewed zeal towards eradicating multiple taxes as well as devote more time to creating a business-friendly environment for the economy to thrive.
“Ultimately, this Workshop is an invitation to both the public and private sector to view taxation as a win-win solution in steering the course of our national economy,” Adewolu concluded.
Recall that President Bola Ahmed Tinubu, in his commitment to address the vexed issue of multiple taxation, recently signed a number of Executive Orders to curb arbitrary taxes in the Country.
He also inaugurated the Committee on Fiscal Policy and Tax Reforms, which is geared towards harmonising taxes and providing an avenue to further engage various stakeholders in order to identify their pain points and critical concerns bothering tax and fiscal policies that would facilitate a conducive environment for local and foreign investment into the country.