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Business in Nigeria: Study reveals multiple taxation

A draft of a study conducted by the Manufacturers Association of Nigeria, in collaboration with the Washington, United States-based Center for International Private Enterprise, has a number of revelations on the actual extent of the burden of multiple taxation on businesses operating in Nigeria.

According to the draft, whose actual report has been scheduled for inauguration in December 2010, the Nigerian business environment is being suffocated by too many taxes from the federal, state and local governments.

Although the report is based on a pilot scheme conducted on the burden of multiple taxes on businesses in three selected states, including Lagos, Oyo and Ogun in the South West geopolitical zone of Nigeria, the report will be significant for a preliminary gauging of the impact of taxation on the Nigerian business environment in view of the position of the three states as the hub of manufacturing activities in the country.

As part of the needed ingredients to make the full report a comprehensive one and all-encompassing, MAN has embarked on a three-pronged stakeholders‘ input mechanism, with the convocation of separate fora in the three states. With two already held in Oyo and Ogun states, the Lagos forum has been slated for September 28, this year.

Speaking on the report in Lagos on Wednesday, the Director-General of MAN, Mr. Jide Mike described the three fora as a way of engendering stakeholders‘ participation in the study, as inputs from the discussions held there will be incorporated into the full report.

The study, tagged, ”Fostering Private Sector Participation in Policy Making through Taxation Reform”, is planned to be a pan-Nigerian one, although the three South West states of Lagos, Oyo and Ogun were designed to form its pilot scheme.

Mike said, ”The study is aimed at understanding the nature of multiple taxation and its effects on businesses. The result will form the basis for appropriate advocacy programmes that will influence policy formulation processes of government, with a view to reducing the tax burden, thus making Nigerian businesses more competitive.

He noted that though a number of Tax Reform bills, aimed at reforming taxation matters were already with before the National Assembly and some states‘ Houses of Assembly, ”it is believed that the outcome of this survey will enrich debates on such bills, while at the same time fast-track the passage of these bills.”

The MAN boss also pledged that the Lagos forum will witness the first official public presentation of the initial draft of the study‘s report.

Giving insights into the draft, Mike said, ”The growth of the Nigerian economy has, over the years, remained stunted as a result of many factors, one of which is the challenge of faced by businesses through uncoordinated tax administration, leading to what is referred to , I common parlance, as multiple taxation. This, among other factors, has resulted in the decline of the manufacturing sector.

”For instance, the sector‘s contribution to the nation‘s Gross Domestic Product declined significant from 9.5 per cent in 1975 to 6.65 per cent in 1995; 3.42 per cent in 2005, with a marginal increase to four per cent in 2009. Similarly, manufacturing capacity utilization declined rapidly from 70.1 per cent in 1980 to 29.29 per cent in 1995, fluctuating to 52.78 per cent in 2995 and with eventual decline to 47 per cent in 2009.”

According to him, the scenario did not leave direct employment generation unaffected. He said a sample survey carried out by MAN on about 300 manufacturing companies showed in 2001, 2.75 million people were employed by the sampled companies but the number declined to 1.043 million in 2005 and 1.026 million in 2008.