Mr. Adeleke Adewolu, the Executive Commissioner, Stakeholder Managament at the Nigerian Communications Commission (NCC) has lamented the negative effect of multiple taxation on businesses and the general economy of Nigeria.
In a speech titled: Multiple Taxation: An Impediment to Economic Growth at the Regional Stakeholders Workshop on Multiple Taxation and Regulations, Adewolu stated that despite the prospect of accelerated economic growth, the presence of multiple taxation, which the World Bank has termed ‘nuisance taxes’ has and continues to prove to be a bane on economic development in the country. He noted however, that before addressing how multiple taxation is an impediment to economic development, it is also important to emphasise that taxation, in and of itself, is a veritable tool for economic development.
“Taxation is the backbone for public finance. It provides guaranteed and sustainable sources of funding for social programs and public investment; it also serves as a tool curated by the government to effectively and efficiently distribute our commonwealth. It is thus evident that taxation is critical for making growth sustainable and equitable. Thus, taxation by design is an instrument for economic development and it is important to acknowledge and support the initiative of all tiers of Government in using taxation as an instrument for socio-economic development.
However, supporting the tax initiatives by the various tiers of Government includes indicating where a category of taxes has become cancerous to economic development. These types of taxes typically manifest themselves in the form of multiple taxation and by design, they reverse growth, stifle innovation and discourage investment. In parabolic terms, they are the scarecrows mounted by government to disincentivize development.”
The NCC official also noted that the National Tax Policy 2017 emphasised the need to eradicate multiple taxation at all tiers of government. He added that the policy states specifically, that taxes similar to those being collected by a level of Government should not be introduced by the same or another level of Government, insisting that the Federal, State and Local Governments in Nigeria shall ensure collaboration in harmonising and eliminating multiple taxation.
On the downside, Adewolu said:
“The paradox of multiple taxation is that it does not lead to an increment in government revenue, rather the crippling effect of these taxes, is that it makes otherwise profitable businesses, unprofitable. It negatively impacts the ease of doing business, shrinks the tax base, incentivizes tax evasion and complicate tax compliance. According to the World Bank, taxing a specific tax base will lead to increasing revenues up to a specific point, after which the overall tax revenue will decline because companies go out of business, or evasion increases significantly.”
He said in addition to these challenges, “the economic burden of multiple taxation is further exacerbated by the administrative burden of complying with these taxes. It further makes Nigeria an undesirable ground for breeding healthy business and competitive practices. The effect of this is that, business enterprises in Nigeria struggle to compete with their counterparts abroad. These incidents weaken our economic foundations, devalues the symbol of economic strength, which is our currency – the Naira and contracts our gross domestic product.”
On the way forward, Adewolu described the workshop as an avenue to rethink our national approach towards taxation by adhering to its founding principles as follows:
• Neutrality: Taxation should seek to be neutral and equitable between forms of business activities. A neutral tax will contribute to efficiency by ensuring that optimal allocation of the means of production is achieved.
• Efficiency: Compliance costs to business and administration costs for governments should be minimised as far as possible.
• Certainty and simplicity: Tax rules should be clear and simple to understand, so that taxpayers know where they stand. A simple tax system makes it easier for individuals and businesses to understand their obligations and entitlements. As a result, businesses are more likely to make optimal decisions and respond to intended policy choices.
• Effectiveness and fairness: Taxation should produce the right amount of tax at the right time, while avoiding both double taxation and unintentional non-taxation. In addition, the potential for evasion and avoidance should be minimised.
• Flexibility: Taxation systems should be flexible and dynamic enough to ensure they keep pace with technological and commercial developments. It is important that a tax system is dynamic and flexible enough to meet the current revenue needs of governments while adapting to changing needs on an ongoing basis.
