Businesses To Improve As FG cuts Tax For SMEs
Last week, the Minister of Finance, Mrs Kemi Adeosun, disclosed that the Federal Government is proposing an amendment to the Company Income Tax aimed at reducing the Right of Tax on Micro, Small and Medium Enterprises (SMEs) from 20 to 15 per cent.
She said the proposal, when approved, would also promote Micro, Small and Medium Enterprises and protect most vulnerable persons in the society.
The new national tax policy also states that Value Added Tax (VAT) will no longer be applicable on residential properties, leases and rent houses, public transport and life insurance.
Throwing more light on the new policy, Adeosun said “Although in the short term, it is a loss for the government but in the long run, we feel that is the right thing to do to improve the ease of doing business and to ease tax burden on the people which is one of the objectives of the government.”
“Apparently for SMEs , the tax levy was 20% but the proposal now in the tax policy is to reduce it to 15%, as part of the government’s effort to stimulate the economy and get it on the part of growth as well as reduce the tax burden on SMEs,” the minister said.
Over the years, Daily Trust checks have shown that one of the key reasons why most Nigerian entrepreneurs hardly venture into medium and small-scale businesses is high and multiple taxes. This has led to some businesses terminating prematurely as the operators couldn’t make meaningful profit due to multiple taxation.
An entrepreneur, James Fadahunsi, who operated Ultimate Bakery in Kubwa area of the FCT, decried multiple taxation by the authorities which led to the closure of the bakery, adding that whenever he made supplies to a local government, the authorities charged a fee which became unbearable.
The decision to cut down tax by the Federal Government was, however greeted with reservation by the National Association of Small and Medium Scale Enterprises (NASMEs) but call for speedy transmission of the policy to the assembly for passage.
The Special Adviser, Technical of NASMEs, John Chris Mamuda, said the decision will complement the ease of doing business on which Nigeria’s position has been improving.
“The Decision of the Federal Executive Council to reduce the tax for MSMEs from 20% to 15 % is a welcome development that will ease the unnecessary burden placed on MSMEs of multiple taxation in form of taxes, levies, fees and fines.
“Indeed this is the outcome of our engagement with the National Tax Policy Review committee constituted by the Minister of Finance. Furthermore, we are calling for more window of grace to enable MSMEs comply fully with the policy,” he said.
Mamuda also said it is important for the Federal Government to sensitize SMEs on the proposed national tax policy in order to encourage more entrepreneurs to start businesses and grow the economy.
“Nigeria is a big and large country where one year at least is needed to mobilise and educate MSMEs on the values of voluntary tax compliance.
We also believe that the essential of this policy is to broaden the tax net and ensure that operators of businesses in the informal and formal sectors are attracted into the tax data base.
“So, sufficient time and efforts must be dedicated towards promoting voluntary compliance by way of tax education and awareness creation. But it will also be necessary to amend existing tax laws to conform to the current realities of our economy,” he added.
He called the Federal Ministry of Finance to turn in the report of the National Tax Policy Review committee to the National Assembly for consideration and passage into law as the Assembly was desirous of amending the tax laws to a friendlier tax regime in line with international best practices.
SMEs market to expand with new tax policy – Expert
A tax expert and Head of Department of Banking and Finance at Nasarawa State University, Prof. Uche Uwaleke threw his weight behind the new tax regime that has been reviewed downwards for SMEs, saying the development will witness significant increase in small and medium scale businesses in the country.
“You are aware that the Bureau of Statistics has revealed that over the past five years SMEs have contributed about 48% of Nigeria’s GDP which is the more reason why the move by the government to cut down tax levies for them is a good initiative. In the long run, it will encourage many individuals to start business which will in turn grow the economy further, now that our GDP is once again going down,” he added.
Uwaleke said early implementation of the new tax law will further complement the Federal Government’s Economic Recovery and Growth Plan (ERGP) efforts to grow the economy.