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Tony Elumelu Speaks On Tax Reforms

 

Chairman UBA Plc, Mr Tony Elumelu has advocated the need for tax reforms especially as it concerns helping SMEs survive and grow.

He stated “As I delivered the keynote address at the 21st Annual Tax Conference of the Chartered Institute of Taxation of Nigeria (CITN), I spoke on the numerous challenges that stifle small businesses as it relates to taxation. According to one of our young Tony Elumelu Foundation entrepreneur who put it so brilliantly – “The average Nigerian business owner is a local government authority on his own because he caters for his own electricity with generators, he builds his own borehole, handles his own waste disposal. The government can make his life easier by creating favourable tax policies that support SMEs.”

Indeed, the plight of our SMEs at the mercy of our tax system is lamentable. Did you know that the average number of taxes businesses pay in Nigeria is 48, compared to 33 in other Sub-Saharan countries? In Hong Kong, it’s just 3. Multiple taxation continues to remain a significant burden for SMEs and corporates operating in the country.

With a population of close to 200 million people in Nigeria, we have only 75,000 registered SMEs in the country. No one needs to tell us that people are avoiding tax or simply refusing to be a part of the system. With such a high cost of compliance, complex and costly business registration processes, many SMEs are choosing to remain informal, which in turn results in a low tax base and low tax contribution to GDP.

Nigeria’s tax to GDP ratio is only circa 6%, compared to far smaller populations like Rwanda at 16%. Imagine the economic transformation we can achieve as a country if we can move our Tax to GDP ratio by 10%. We will raise an additional $40billion in government revenue – identical to the sum of our foreign reserves.

But it won’t be easy. Government must educate, inform and raise tax awareness, Government should drive mass mobilisation of citizens – let citizens know why they need to pay taxes and give them the assurance that their tax will be properly utilised. In addition, government should employ the use of smart tax incentives to attract and incentivise local and foreign investors.

Our country’s ambassadors and embassies must be tasked with a two year timeline to increase the number of double tax treaties between host countries and Nigeria. Nigeria has 14 taxation treaties while a country like South Africa has 79 double taxation treaties, and we are the largest economy in Africa. Our embassies should adopt a target in the next two years to sign Tax treaties with our top 100 trading partners in the world.

Most importantly, government must put in place tax systems to encourage SMEs-— the engine for job creation in the economy. Until there is a reduction in what SMEs pay as tax, elimination of multiple taxation, abolition of minimum income tax and excess dividend tax, it will be difficult for us to expand the tax base. It will be difficult for us to attract investors into this country, and it will be difficult for us to retain the ones already in the country. It will be difficult for us to mobilise our SMEs to help create employment that we need so much in this country. It will be difficult for us to have the citizens hold leaders accountable.

In conclusion, let me remind the National Assembly members of their mandate in office. The government must pass the Executive Bill immediately. Let’s get the National Assembly to fulfil their obligation to society and pass the bill immediately, so we can start making progress. If it means all of us marching there before May 29th, let’s do so.

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