Multiple taxation and levies by the three tiers of government are responsible for the death of about 80 percent of small businesses as against financial access by small business operators in the country, BusinessDay investigations have revealed.
The investigation also revealed that policy summersault by government is another constraint on the growth of small businesses. A situation, experts say, has the effect of crippling businesses, worsening unemployment and negatively affecting micro and macroeconomic indices.
BusinessDay findings show that small business operators are levied at all levelsof government.
A small and medium enterprises (SME) operator, who spoke with BusinessDay, said his business pays about N450,000 yearly local government taxes, excluding state government pay-as-you-earn (PAYE) and Federal Government withholding levies.
Another SME operator involved in food business told BusinessDay that the situation leaves much to be desired.
Bisi Padonu, an SME operator, said, “The taxes paid are tax returns remitted monthly to Federal Inland Revenue Service (FIRS), and then the self-assessment paid yearly to Lagos Internal Revenue Service (LIRS). But the fact remains that businesses are not adequately informed, even as to how to go about remitting the levies”.
He noted that a resultant challenge is clients’ refusal to pay value added tax (VAT) on services rendered, so most of the time, businesses end up paying the levy.
Analysts are of the view that in levying taxes for small enterprises, issues that need to be considered are how these tax policies can be designed to bolster the growth of small businesses and the most effective ways to administer them.
They, however, said that if conducive environment was created for these SMEs to grow through proper regulation and tax cuts, the SME sector has the highest propensity to transform the economy.
According to them, most large companies have their roots in small and medium enterprises, suggesting that the future large corporations are SMEs of today that must be nurtured to ensure their growth.
“Although taxation can contribute to development and to welfare, in the case of SMEs tax must be done in such a way that puts their income and need for survival into consideration”, a consultant in the area of SMEs told BusinessDay in a telephone interview, adding that it is expedient that enough profit is allowed them for the purpose of expanding their businesses.
According to a World Bank study, for many small entrepreneurs in Africa, the choice to pay tax or remain in the informal sector is simple, with most firms choosing to stay in the informal sector because the perceived benefits outweigh the perceived costs, adding that firms rarely see their tax contributions at work, discouraging compliance.
