The Nigerian Communications Commission (NCC) has intensified its sensitisation on the negative impacts of multiple taxation on the Nigerian economy, and has called on the three tiers of government to work harmoniously to ensure that they comply to the 2017 Tax Policy.
Speaking at a recent regional workshop hosted by the Commission in Ibadan, Oyo State, NCC’s Executive Commissioner, Stakeholder Management, Mr. Adeleke Adewolu, laid out the derivable from a smooth tax system in the country.
The workshop was hosted specifically to interact with senior government functionaries from all the States in the South West Geo-political Zone in order to build better understanding on how cancerous and harmful the issue of multiple taxations and regulations being imposed on telecom companies by the States, their agencies and agents can be to the country’s development.
Noting that Nigeria, as Africa’s most populous country and the largest economy on the Continent, is expected to have very strong economic growth that would generate substantial prospects for further growth and spillovers for the whole West African region, Adewolu said this prospect has been doused by the presence of multiple taxation.
“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 a bane on economic development in the Country.”
He pointed out that despite the fact that taxation, in and of itself, is a veritable tool for economic development, multiple taxation has become an impediment to economic development.
He charged stakeholders to dispel the misconception that taxation is used as punishment on fledging businesses, but to see it as a fiscal tool for economic development.
Adewolu explained further: “Taxation is the backbone for public finance. It provides guaranteed and sustainable sources of funding for social programs and public investments, it also serves as a tool curated by the government to effectively and efficiently distribute our commonwealth. 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.”
He however noted that supporting the tax initiatives by the various tiers of Government includes indicating where a category of taxes have 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 government to dis-incentivise development.”
Referencing the National Tax Policy 2017, which emphasises the need to eradicate multiple taxation at all tiers of government, especially with taxes similar to those being collected by another level of Government, and the signing of a number of Executive Orders to curb arbitrary taxes in the Country by President Bola Ahmed Tinubu, the Federal, State and Local Governments should ensure collaboration in harmonising and eliminating multiple taxation.
“Also, the inauguration of the Committee on Fiscal Policy, Tax Reforms by the President, which is geared towards harmonizing taxes will provide an avenue to further engage various stakeholders in order to identify their pain points and critical concerns bothering tax and fiscal policies. This would also facilitate a conducive environment for conducive for local and foreign investment into the country.”
He reflected on the key negative effect of multiple taxation, stating that it does not lead to an increment in government revenue, rather the crippling effect of these taxes is that they make otherwise profitable businesses, unprofitable, negatively impacting the ease of doing business, shrinking the tax base, incentivising tax evasion, while also complicating tax compliance.
“According to the World Bank, taxing a specific tax base will lead to increasing revenues up to a specific point, after which the overall tax revenue will decline because companies go out of business, or evasion increases significantly.
In addition to these challenges, the economic burden of multiple taxation is further exacerbated by the administrative burden of complying with these taxes. It further makes Nigeria an undesirable ground for breeding healthy business and competitive practices. The effect of this is that, business enterprises in Nigeria struggle to compete with their counterparts abroad. These incidents weakens our economic foundations, devalues the symbol of economic strength, which is our currency – the Naira and contracts our gross domestic product.”
He charged stakeholders to use the workshop as a platform to revert to the principles of taxation, which he enumerated to include Neutrality between forms of business activities; Efficiency through minimised government compliance costs to business and administration; clarity and simplicity of tax rules; effectiveness and fairness of taxes; and flexibility of taxation systems to ensure they keep pace with technological and commercial developments.
While expressing his optimism that the workshop posed as sufficiently clarity to common mischiefs on taxation, Adewolu said the policy direction of the Federal Government is that all tiers of government are expected to align, as closely as possible, to the fundamental principles of taxation.
He hoped that there will be a renewed zeal towards eradicating multiple taxes and more devotion to creating business friendly environment for the economy 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,” he concluded.
