Multiple taxation and illegal levies in Niger Delta

IN all parts of the country, small businesses remain largely in the informal sector of the economy because the perceived benefits of remaining informal, outweigh the perceived costs. However, this sector of the economy operates in a challenging business environment, with some of the major impediments to their doing business being the scant electricity supply, multiple taxation and illegal levies. In the Niger Delta region, where PIND has been working for over 13 years, to promote a peaceful environment for socioeconomic activities to thrive, the story is no different. The informal business sector is juggling several taxes levied on businesses across the region with significant variations between what is imposed by the Federal government, state, and local governments throughout the region. Businesses may be subjected to as many as 100 different taxes, charges, fees, and levies and in some instances, taxes for the same event or asset that are levied by the three tiers of government. The reality of the Niger Delta region shows that, despite its oil wealth, sustainable economic growth has been lacking, and more than half of its population still lives in poverty. While we acknowledge taxes as important sources of funds to governments for the development of the economy and the provision of social services, the problem faced by small enterprises is the negative relationship between taxes and levies and their ability to sustain themselves and expand their businesses.

The multiplicity of taxes, illegal levies and high administrative burdens in the states have adversely affected the performance of manufacturing and trading businesses; recording a high closure rate for prominent industries in the region. Research from the Small and Medium Enterprise Development Agency (SMEDAN), shows that 85% of small businesses in Nigeria die before their 5th anniversary. Among the factors responsible for these close-ups are tax-related issues ranging from highly discriminatory tax rates, a multiplicity of levies, and complex tax regulations, added to these is the lack of proper enlightenment or education about tax-related issues. In many government policies, small and medium enterprises (SMEs) are usually seen and treated in the same light as large corporations. However, their size and nature make them unique and vulnerable to illegal tax collection activities. The establishment of the Presidential Committee on Fiscal Policy & Tax Reforms in August 2023, is an indication that the government is keen to work with other stakeholders around this nutty issue of multiple taxation and illegal levies. The task of the Committee needs to include actively engaging with small businesses, creating awareness and sensitization of tax-related issues among MSMEs, enabling them to navigate the tax system more effectively and comply with regulations. The government needs to focus on improving the policy frameworks and tax administration processes, to make them more conducive to the growth and sustainability of MSMEs.

This can be a way to kickstart collaboration and partnerships between government agencies, MSMEs, and relevant stakeholders to address taxation and illegal levies challenges and promote a favourable business environment. The efficient management of this established collaboration and partnerships with relevant government agencies, civil society organizations, and development partners, will ensure the implementation and monitoring of the execution of the proposed reforms. The government has called on experts and interest organizations to share recommendations on the way forward. We at PIND are focusing on two key policy aspects Revenue Transformation and Economic Growth Facilitation. The Revenue Transformation will expect to address revenue administration, taxation structure, incentives management, and non-tax revenue mobilization. For our recommendation on the Economic Growth Facilitation aspect, this will include promoting ease of business, addressing impediments to trade, and supporting MSMEs. Small businesses and enterprises would directly benefit from policy reform since they are the potential engine of growth and are likely to create the largest number of jobs, from such reforms

PIND has put forward these recommendations from our decades our findings of over a decade of implementing projects in the Niger Delta region. The Nigerian government needs to put in place tax government policy or legislation to support small businesses by eliminating all mobile levies; abolishing all kinds of fees and levies on mobile factors and removing roadblocks on internal traffic that prevent the establishment of efficient cross-state supply chains and reduce competition. There needs to be an improvement in the transparency of the tax system that relates to small businesses, serving to eliminate the chances of corruption and harassment by tax officials and consequently of non-compliance by the businesses. Furthermore, the government is encouraged or invited to conduct a proper review of the categorization of businesses to provide clarity on the appropriate tax bands for the different levels of small businesses; while prioritizing the production of a register of operational businesses across the local government councils, to get near-accurate data on GDP and better estimation of the value of tax. In addition, the government is encouraged to consider as a matter utmost importance and urgency, the full digitization and harmonization of the tax administration process at State levels to ensure accountability, efficiency, and fairness in the collection process.

As it stands today, the three tiers of government are over-exploiting the current tax base so there is an urgent need to carry out a reduction in the overhead capital and cost of tax administration.

We make these few recommendations, believing that, if the government starts with these and they are appropriately implemented, they will help chart the way forward, by contributing to the improved fiscal and tax reforms in the country. PIND is ready to make additional contributions, and provide any clarifications that may be required on any of the recommendations and we anticipate being invited to be a part of the public discourse in the future.