The Centre for the Promotion of Private Enterprise has kicked against the excise duty imposed on all services, the 0.5 percent duty on all imports coming from outside Africa, and the increase in Tertiary Education Tax in the Finance Bill recently passed by the National Assembly.
The economic think tank also opposed the hike in company income tax imposed on gas companies for gas flaring.
“We commend the President for withholding assent on the 2023 Finance Bill as this would allow for broader consultation, participation and inclusion in the legislative process. This is also in line with democratic standards of law making,” the Director of CPPE, Muda Yusuf, said in a statement on Sunday.
He described the provision on excise duty on all services as too broad, inexact and wide-ranging, saying it makes the business community very vulnerable.
“There is no jurisdiction around the world where all services are liable to excise duty. Excise duties are typically specific and selective, and often imposed to disincentivise consumption or production of particular product groups,” he said. “The current open-ended provision is inimical to investment. It makes the imposition of excise duties arbitrary, indiscriminate and unpredictable.”
The CPPE said the bill should contain specifics of services to be taxed for better stakeholder engagement.
“Meanwhile, it is important to take account of the fact that practically all services are currently liable to Value Added Tax,” Yusuf said.
Describing the service sector as “very strategic” to the Nigerian economy, the CPPE said: “We are concerned that companies in the service sector are already paying huge taxes in the form of company tax which is currently at 30% , tertiary education tax at 2.5%, NITDA levy at 1%, NASENI levy at 0.25%, Police Trust Fund Levy at 0.005% and withholding tax on profit distribution at 10%. All the taxes are percentages of company profit.”
“Additionally, there are numerous taxes and levies imposed by state governments. Investors in the sector pay various sums as fees and levies to regulatory agencies. High tax burden on businesses is detrimental to investment and job creation and could ultimately undermine revenue generation prospects of government,” it added.
The group said the proposal in the Finance Bill to impose 0.5% levy on all imports coming from outside of Africa will be an additional burden on both businesses and the citizens.
“It will escalate operating expenses, production costs and fuel inflation in the economy. Most equipment, machineries, ICT equipment, medical equipment are all imported from outside of Africa. Imposing a levy of 0.5% on this group of items will be inimical to investment, economic growth and the welfare of the citizens,” Yusuf said.
He said currency depreciation had already made imports very expensive with profound inflationary effects.
He said, “Currently, investors and citizens are paying 0.5% levy on all imports from outside of ECOWAS. This is in addition to import duty and numerous charges and levies paid by importers at the ports.
“Many manufacturers import their raw materials from outside of Africa, especially intermediate products not available on the continent. We strongly advise against the imposition of an additional levy on imports.”
The CPPE said the proposed 50% company income tax on gas companies is inconsistent with the Petroleum Industry Act, which was enacted in 2021.
“The prospects for investment in gas have never been this auspicious, driven largely by the Russia-Ukraine conflict. This is a great opportunity for Nigeria to attract investors into its gas sector and take advantage of the current global high demand for gas,” Yusuf said. “This is not a good time to impose a punitive tax on gas companies. The government should explore other gas flaring mitigation measures, which must be proportional to the volume of gas flared.”
He said the government should refrain from actions that would signal policy inconsistency to investors in the sector as this could dampen investors’ confidence.
The CPPE said it would be inequitable to increase the Tertiary Education Tax to 3% less than two years after it was raised to from 2% to 2.5%.
“It is too soon to propose another increase. Besides, companies are still contending with several macroeconomic, structural, global and regulatory headwinds. This would will be putting too much burden on corporate entities on business and investors in the Nigerian economy,” Yusuf said.
He said the country should be a lot more creative in its revenue drive so as not to overburden the current crop of taxpayers.
“The tax base is still extremely narrow and should widened. The economy is about 50% informal, which meant that the incidence of taxation is largely on the formal sector of the economy.”
Yusuf said the focus of taxation should be on collection efficiency, broadening the tax base and improvement in tax governance. “Revenue collection responsibilities should be integrated into a single agency for more efficient administration.”