Following the Federal Government’s plans to introduce new taxes in 2022, an economist, Dr. Muda Yusuf and other members of the organised private sector have argued for the exemption of small businesses from taxation.
He said it was necessary for the government to define a threshold below which micro enterprises and low-income earners should be exempted from any form of taxation.
According to Yusuf, “This is in line with the principle of equity in taxation. It is also in consonance with the principle of efficiency in tax administration, especially when we have an estimated 40 million micro enterprises, most of whom are in the informal sector.”
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, during a public hearing on the 2021 Finance Bill, which was organised by the House of Representatives Committee on Finance, stated that the Federal Government would introduce new tariffs and levies in 2022 in the 2021 Finance Act as part of its reforms and amendments of the country’s tax laws.
Yusuf, the CEO of Centre for the Promotion of Private Enterprise (CPPE), in a chat with The Guardian, noted that in many advanced jurisdictions, 80 per cent of the personal income tax is paid by just about 20 per cent of the taxpayers.
“This is a reflection of the principle of progressive tax, where tax payment is strictly according to the ability to pay. We have no business going after micro enterprises and low-income earners for tax in Nigeria. It is inequitable and also inefficient.”
The former Director General of Lagos Chamber of Commerce and Industry (LCCI), said the high level of income inequality demands that greater focus should be on the principle of progressive taxation. This, he said, is also a way of reducing poverty and income inequality.
This plan by the government to introduce new taxes also drew the ire of Nigerian manufacturers and members of the Organised Private Sector of Nigeria (OPSN) who asked the federal government for a breathing space and to spare businesses further taxation.
Reacting to the statement by the Finance Minister, the OPSN said that any move by the government to increase taxation in whatever form or guises would be counterproductive and retard the contribution of the manufacturing sector to the GDP and cause a great setback on the ability of the real sector to support the poverty reduction/alleviation and job creation aspirations of President Muhammadu Buhari’s administration.
The Manufacturers Association of Nigeria (MAN), in its response specifically stated that manufacturers in the country have been groaning under multiple taxations from the three tiers of government.
It also said that its members are quite anxious about the imminent ill-advised re-introduction of excise, as well as a steep increase in rate of excise on some products, including carbonated and non-alcoholic drinks and tobacco products.