Business

May 20, 2024

Multiple taxes threaten gains of manufacturers in AfCFTA  —  MAN

MAN

MAN

•As high operating cost forces investors into service sector

Stories by Yinka Kolawole

The Manufacturers Association of Nigeria (MAN) has warned that the impact of multiplicity of taxes imposed on the manufacturing sector in the country may hinder the sector from maximizing the potential gains in the African Continental Free Trade Area (AfCFTA).

Director General of MAN, Segun Ajayi-Kadir, stated this in a paper he presented at the just concluded annual tax conference of the Chartered Institute of Taxation of Nigeria (CITN) in Abuja.

This is even as Muda Yusuf, Chief Executive Officer at Centre for the Promotion of Private Enterprise (CPPE), says that many manufacturing investors are now migrating to the services sector due to high operating costs.

According to Ajayi-Kadir, taxes from federal, state, and local governments impact manufacturing, hindering the development and competitiveness of the sector.

“The imposition of overlapping taxes has created compliance burdens, operational inefficiencies, and reduced profitability for manufacturers. Duplication of taxes increases production costs and final prices of goods and services, eroding profit margins and hindering investment incentives,” he stated.

He noted that a survey conducted by MAN in 2023 reveals numerous taxes with overlapping effects that add complexity and burden to businesses.

His words: “Sales tax and Value Added Tax (VAT), mobile advertising charges, education levies, tenement rates, Land use charges, and parking fees contribute to financial burdens for manufacturers.

“Multiple taxes discourage investment, stifles entrepreneurship, and hampers economic growth, affecting small and medium industries (SMIs) disproportionately,” he said.

He said that the competitiveness of Nigerian manufacturers in the global trading environment has declined due to the multitude of taxes.

“This tax burden may hinder the sector from maximizing potential gains in AfCFTA,” Ajayi-Kadir added.

In his remarks, Coordinating Director, Federal Inland Revenue Service (FIRS), Matthew Gbojubola, said there are ongoing moves to simplify the tax laws in the country to ensure easy compliance.

According to him, the Presidential Tax Reforms Committee was specifically established to rewrite and simplify the tax laws, adding that efforts were ongoing to produce a new law for the entire tax system.

“The government wants businesses to grow but it needs the tax revenues to create a better operating environment,” he added.

Meanwhile, also speaking at the CITN conference, Muda Yusuf reiterated that manufacturers in Nigeria were overburdened with high cost of operation, such as energy costs, huge logistics costs, supply chain challenges, forex volatility, and customs duty exchanges.

Yusuf noted that most manufacturers have had to provide the road to their factory, provide security, water, electricity and other amenities that are supposed to be provided by the state governments.

“I’m saying this to underscore the point that the manufacturing sector needs some empathy in this economy. And that is why many investors are now migrating to the services sector. The economy now is about 57 percent services, because if you are in the service sector, you don’t need a 100 KVA generator, you don’t need clearing containers from the ports,” he stated.