On the 2nd of April, 2016, FocusHub Nigeria, a technology and entrepreneurship centre based in Port Harcourt, brought together CEOs, technology experts, tax experts, professional accountants and various other individuals from different works of life to come deliberate over an issue that has been of great concern to Nigerians – taxation. The event also had in attendance Ese Emerhi – a representative of the Partnership Initiatives in The Niger Delta (PIND), TEEP beneficiary – Amaebi Stanley Pere-Albert, CEO of Endoclan Apps Ltd , Frederick Damasus – staff of the Centre for Creative Development Strategies (CCDS) etc
The event which took place at Mr.Biggs hall GRA Phase II Port Harcourt, was tagged – Multiple Taxation And The Role of Technology. It was put together with the following four key objectives
1. Preventing multiple taxation due to the inter-lapping functions of various governmental agencies.
2. Preventing multiple taxation due to the inter-lapping functions of various governmental agencies.
3. Weeding the system of illegal revenue collectors.
4. Establishing the need for a round table discussion with key players in the sector – local, state, federal and representatives of revenue boards, leaders of business associations etc
5. Designing a system that would help track, monitor and identify tax defaulters. There is also the need to plug problem gaps in the current tax processes.
According to the Oxford Dictionary, tax is a compulsory contribution to state revenue, levied by the government on worker’s income and business profits, or added to the cost of some goods, services and transactions. Governments the world-over, rely on the payment of taxes by individuals and companies to provide infrastructural services and social amenities such as electricity, good roads, schools etc Taxes also contribute to the rise in per capita income of the country.
Under the current Nigerian laws taxation is enforced by the 3 tiers of Government, Federal, State and Local Governments. These are enforced and guided through various laws and agencies which include the Income Tax Management Act, Companies Income Tax decree, Joint Tax Board as well as few others. All these were created with the purpose of ensuring strict adherence to tax payment and to discourage the issue of tax evasion. Nigerians however, still decry the amount and number of taxes levied on them and their businesses.
In his welcome address, Ikechukwu Uche (co-founder, FocusHub) gave a brief insight into the gains of technology in the 21st century and its possible applications in solving the socio-economic challenges peculiar to the Nigerian society. He was optimistic that by the end of the event, a plausible and realistic solution to the subject matter to be deliberated upon, would have been met.
To kick off the ideation session, an expert on the subject matter, Mr. Ibubelem Ikiroma put participants of the ideation session through a well detailed overview of the number and category of taxes that businesses and individuals were expected to remit to the government. The audience were educated on the objectives taxation, principles of an ideal tax system, brief overview of tax administration in Nigeria, Tax planning, Tax Evasion, SME business types and elements of a good technology driven tax system.
Shedding more light on the challenges faced by business persons were Oseni Abiola , CEO of , a Trisat Communications and Emmanuel Essiet, a representative of the Association of Fast Foods and Confectioners of Nigeria (AFFCON). They each shared their personal experiences and a few key points were identified;
1. Most SMEs are not being taxed according to their income.
2. The issue of illegal taxation seems to be more prominent at the local government level.
3. There are no comprehensive tax payers’ records that can easily be assessed by both the tax payer and the revenue collecting agency to confirm payment or non-payment of levies.
4. There seems to be quite a significant number of inter-lapping functions by the three tiers of government. There are unclear lines as to who remits what amount to whom and how often?
5. Inadequate information and communication at the local levels.
TAX COMPLIANCE COSTS
In a study titled Tax Compliance Costs of Small and Medium Scale Enterprises in Nigeria by Emmanuel Eragbhe and Kennedy Modugo (2014), published in the international Journal of Accounting and Taxation, they noted that Nigerian SMEs bear considerably high tax compliance cost, which reduces stifles their innovation and growth. The study also reveals that on the average,
“the SMEs overall Tax Compliance Cost (TCC) in Nigeria is about N108, 594 per annum and the values range from N14, 500 to N725, 000 per annum. Smaller SMEs were found to have an average TCC of N219, 601 per annum as against N123, 047 TCC per annum for larger SMEs, which implies the existence of tax compliance costs regression in Nigeria”.
It went on further to disclose that,
“Value Added Tax (VAT) has the highest TCC, accounting for about 33 per cent of the total average tax compliance costs”.
Furthermore, the study shows that…
“SMEs in manufacturing industry have the highest relative average tax compliance cost, while those in business services have the lowest average tax compliance cost. Exporting SMEs in Nigeria bear higher tax compliance cost burden than non-exporting ones”.
1. Engagement of tax consultants by companies from the startup phase of their business. This is necessary to help SMEs identify tax-deductible and non-deductible expenses. Consultants also help business owners identify government tax incentives that would would help relieve their tax burdens.
2. Proper electronic authentication of government sanctioned tax agents – This would ensure that businesses do not fall prey to fraudsters.
3. The need for a tax simplification system at all levels, possibly a top-down approach from the Federal level down to the local level, showing a customized list of applicable taxes which is to be managed by a private organization.
4. Tax education and campaign at various levels; Federal, State and local via traditional and digital media platforms as well as the utilization of mobile telecommunication devices.
5. Nation-wide implementation of the tax electronic card issued to businesses, showing their tax information and history.
6. The creation of a crowd-sourced system where business owners can complain about their tax challenges or relate their experiences.
CAVEAT EMPTOR: The suggestions listed above are the opinions of participants at a forum discussion and are by no means, a direct reflection of the Hub’s stand on taxation.
As a technological hub, FocusHub believes that technology can help deliver the vision of an effective, fair but concise tax administration system. The hub is willing to give support to interested parties who would want to implement these solutions.
At the end of the day, it is all about creating an enabling environment for potential entrepreneurs who are willing to provide solutions to the socio-economic problems that plague us in this part of the world. Our solutions today would directly aid in the fight against corruption and put Nigeria back on the map as to the go-to destination for trade and investments.
ABOUT FOCUSHUB NIGERIA
FocusHub Nigeria is a new technology entrepreneurship and social innovation hub based in Port Harcourt. We have a mandate to create sustainable business models dedicated to solving development challenges encountered in the Niger Delta region.
We are a non-profit community center/hub where startups, SMEs, entrepreneurs, IT developers and programmers, impact investors, students, corporate and private organizations meet and interact for the purpose of technology and knowledge transfer, mentoring, training, incubation and networking; with the aim being to drive economic growth, create jobs and enhance the competitiveness of the Niger Delta.