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Menace of taxes and levies on business owners

By Silas AkhigbeAkhere

THE inability of government at all levels – Federal, state and local government- to provide jobs for the teeming population has long called for alternative means of livelihood for unemployed people in Nigeria. This has led to the establishment of different business ventures, ranging from vocational-oriented, artisanship and experimentation with different business ideas as such occurs to the individual. This has paved way for employment generation through engagement of assistants, where needed, thus reducing unemployment and crime rates in the society.

tax

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It is an established fact, in marketing parlance, that business operates in environment of both controllable and uncontrollable factors. The uncontrollable factors being internal and within the control of business owners, e.g. type of business, capital requirement, business location, size of personnel, research and development skills and patents, production capacity, pricing, etc.

Since business owners operate within a complex and dynamic environment, which the firm must continuously monitor and adapt to, the business owner can manipulate his own internal environmental factors to suit his business activities in order to survive and prosper. He can set up a formal procedure for threat and opportunity analysis, through efforts to identify, appraise and respond to various signals from the environment.

The external environmental factors are those outside the control of the business owner and as such are referred to as uncontrollable. They can be categorised into five main components: legal, economic, technological, cultural and competitive environment. It is within the dictates of these external environmental factors and successful manipulation of the internal environmental factors that business owners attempt to achieve predetermined goals of profitability, sales volume, sales revenue, customer satisfaction, cost reduction and meet social responsibilities.

Of particular relevance to the subject under discussion is the legal components in the environment in which businesses operate. Every business is obliged to be registered with the Corporate Affairs Commission, CAC, to be counted among listed and legal businesses in the country. Name, nature and location of businesses are specified to avoid fake operations and clashes of use of business names.

This is done with specified fees for different types of business. The other dimension of legal requirement is payment of taxes and levies to government for hitch-free operation of business. Payment of taxes is a statutory requirement by government of its working or economically engaged citizens to provide needed infrastructure for socio-economic development and to create enabling environment for businesses to thrive. It is an avenue for revenue generation to meet government expenditure on administration, defence and social services to the people.

Tax payments ought not to be burdensome or oppressive, as the principle is “pay as you earn”. This is what is adopted in civilized climes and public sector in Nigeria. But unfortunately, the reverse is the case in the private sector, with particular reference to SMEs in Edo State, Nigeria. The inordinate quest to increase internally generated revenue, IGR, by both state and local governments in Edo State, of late, has led to imposition of bogus taxes and levies on business owners in the state.

According to a tax officer in Auchi, Edo State, under the new system, businesses are classified as small, medium and large and, thus, taxed accordingly. The basis of this classification is nebulous and shrouded in mystery. The minimum amounts to pay as tax ranges from N14,500 by those categorised as small and another amount for medium and large, respectively. What is the moral justification for this obnoxious tax imposition on small business owners? For instance, as a casualty of this merciless tax regime, this writer operates a retail shop for household goods. Current worth of business is N40,000; loan serviceable with N4,000 monthly (10%), shop rent is N72,000 per annum.

The tax assessment for year ended December 31, 2018 was N10,000, then increased to N13,100 for unintended failure to pay on time, by January 2019. The criteria of this assessment are baffling for a business in dire need of capital to boost stock. Could it be the size of the shop or wrong estimation of worth of goods, or exaggerated projection of sales, despite the bad economy, which the tax assessor never care to look into? The tax officer merely peeped into the shop and assumed arbitrary amount for owners to pay, without regards to sales condition businesses. Surprisingly, the tax card has the following figures: N428,571 under sources of income, N428,571 as gross income, N285,714 as total income, and N142,857 as taxable income. How did they come by these figures without any interface with the shop owner?

How and where funds are sourced, sales condition, whether favourable or not, and profit or losses of business are all the owner’s headache. What is the difference between government’s tax policy and the Benin Electricity Distribution Company, BEDC, that accusing finger is daily being pointed at, for estimated billing with which the masses are dubiously exploited for   unconsumed electricity?

Same is with subscriptions to television operators. The masses are cheated for unused time under subscription. For instance, you pay N1,400 for classic bouquet to Startimes for 30 days. Most of the times, there is no electricity to watch programmes or when one is indisposed to switch on the television; yet the money runs. The ideal situation ought to be like the phone recharge cards, which counts only when calls are made. How long do we remain silent in the midst of these blatant exploitations?

Tax payments apart, business owners are inundated with other different levies, like local government levy, signboard levy and business premises renewal levy to Ministry of Commerce and Industry. All these are done irrespective of viability status or survival of businesses. To worsen the situation, business owners are threatened with court arraignment, where N5,000 administrative charges are added to tax or levy by the court, to be paid immediately or be remanded in prison custody. Is this how to encourage the growth and development of SMEs?

Business owners have thus become the burden bearers of IGRs hunting in the state. The business owners need some respite; let them pay what is commensurate with the worth of their business operations as taxes. Government can fix minimal rates of N2,500, N5,000 and N10,000, respectively, for their categorisation of small, medium and large businesses. This will be convenient for all to pay and will increase the revenue generation potentials of the state.

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