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Nigeria: Multiplicity of taxes in Nigeria - addressing the impediments

Friday, 18 July 2014   (0 Comments)
Posted by: Author: Deloitte
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Author: Deloitte 

The 2014 World Bank report on doing business in Nigeria listed up to 47 tax payments made by companies every year, with a whopping 956 hours spent on complying, preparing, filing, and paying these taxes. This is a far cry from an average Organization for Economic Cooperation and Development (OECD) country where the statistics of tax payments and compliance duration are 12 and 175 hours, respectively.

A detailed examination of these statistics, especially the number of tax payments made every year, begs the question – what taxes are responsible for this burden? Are there multiple taxes included in these figures?

Many business owners often cite multiplicity of taxes as the bane of businesses in Nigeria. It is one of the first issues that come to mind when discussing the effectiveness of the Nigerian tax system. Multiple taxation generally means the imposition of more than one tax on the same tax base by the same or different regulatory authorities.

In Nigeria, multiple taxation often extend to arbitrary imposition of charges and levies by some tiers of government and are perhaps inconsistent with the fiscal federalism model which should ordinarily be the case in a Federal structure.One does not need to look too far to see why various levels of government and regulatory agencies come up with these taxes. One of the reasons for this is the dwindling allocation of revenue generated (usually from the proceeds of crude oil sales) to the federating units which appears insufficient to meet the financial demands of running the units. This is more so when there are several sectors of the society that need urgent economic intervention.

Multiple taxation is harmful to businesses as they promote uncertainty and unlock the channel for revenue leakages. Taxpayers are concerned that funds which ordinarily should be retained in businesses are paid as taxes, there may be constraint in re-investment potential of the businesses. This is more so when a typical business in Nigeria spends an estimated 40 days in a year complying with tax laws.

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