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In Nigeria’s largest city, SMEs choke as touts levy multiple taxes

Business experts often say that one in three small businesses in Nigeria dies within the first three years of life.

You only need to set up a business in Lagos, Nigeria’s commercial nerve centre and largest city, to understand why this phenomenon persists.

In many of the local council development areas (LCDAs) in Lagos, touts, popularly called ‘agberos’ in the local parlance, force small businesses to part with N300 to N4,000 every day for ridiculous charges ranging from radio and television taxes to the land and parking permits, even when many have no cars or trucks to park. In the nine LCDAs investigated by this reporter, small businesses pay at least 10 different taxes without evidence of payment.

Small businesses in this context refer to micro, small and medium businesses, including tricycle and motorcycle operators.

In Mushin, each tricycle operator pays N3,300 every day to four different groups, which include the National Union of Road Transport Workers, the local government, the state government and the Tricycle Owners Association of Nigeria (TOAN).

This does not include N200 each day for the police and another N200 for the Lagos State Traffic Management Agency (LATSMA), the tricycle operators told BusinessDay. Only two tickets of N100 and N50 are issued by the payees. Motorcycles pay N600 each day, and roving micro businesses pay N500 to N650 each day without any ticket issued or shown to them.

Generally in Lagos, shops are expensive, with annual rent ranging from N300,000 to N1 million. In places like Oshodi, rents go as high as N1.2 million to N1.8 million annually. As a result, more micro and small traders often make do with make-shift shops and open places rather than standard shops. Consequently, touts have seized the moment to unleash mayhem on the helpless traders.

According to Sam Umaru, one of the traders at Oshodi, touts forced them to pay N550 each day from Monday to Wednesday, N850 on Thursday, N950 on Friday and N1,050 on Saturday.

“You dare not ask them for a receipt or ticket, and they do not care if you have made sales for the day or not.” he said. “Some people here have shut down, left Oshodi, and dismissed those they once employed to market for them. Some of them are now gatekeepers and security personnel elsewhere because they could not cope.”

On December 2, officials of Kick Against Indiscipline (KAI) chased traders from pillar to post between 10.35 and 11.06 am. This BusinessDay reporter was there and was told by the traders that the agency often collected N1,500 to N10,000 from any trader whose wares were seized. The traders alleged that they usually gave KAI officials N200 each day to prevent them from ‘disturbing their business’.

At Charity bus-stop, this reporter saw a seller of sweet confectionery being harassed by an agbero, who demanded N200. In an interview, the sweet seller said he paid N500 every Tuesday, N300 every Thursday and N150 any other day. I tried to find out how much his goods were worth and he said, “Less than N2,500.”

At Isolo, traders pay N5,000 as trade licence fee/lock-up shops rate, and N250 for radio/television licence annually, including the Lagos State Signage and Advertising Agency (LASAA) rate of N14,000 to N200,000 if they have signposts. At Isolo or Oshodi, tricycle operators pay between N1,800 and N2,100 each day. At a popular Aswani Market, which is busiest on Tuesdays, micro traders pay between N400 and N500.

“Alhaja collects N200; Alhaji collects N100, and local government council takes N100,” a female trader told this reporter.

At Otigba Cluster, popularly known as Computer Village, located at Ikeja Council Area, traders without standard shops at Ogunbiyi Community Development Authority pay as much as N1,800 every day. The money is collected by three sets of touts who do not issue receipts or tickets for the payments. Some of them claim to be ‘land owners’ while others pretend to be working for the local government.

“Some of us have decided to stay outside of that place. Yet we pay N25,000 every year to the area boys,” a trader, who preferred anonymity because of her safety, told me.

At Ketu and Mile 12, which are in Kosofe LCDA, traders pay N400 to N600 each day, while tricycle operators register their business with N5,000 to N15,000, and pay N1,500 to N2,000 each day. If you are a tricycle rider operating between Ikeja and Ogba, you will crisscross four LCDAs and pay N600, apart from the regular N1,200 to N2,000 given to four groups of revenue collectors.

“Life in Lagos is hard. No jobs, but when you take up anything, the agberos, police, and others will stifle you,” one tricycle operator, who said he is a graduate of Banking, told BusinessDay.

The website of the Lagos Internal Revenue Service lists approved state taxes as personal income tax (imposed on individuals in employment or running businesses), Pay As You Earn (deducted from salaries), capital gains tax (paid on profit made from sale of capital assets like land), stamp duties (imposed on legal documents/instruments), business premises (tax on property), land use charge (imposed on land used for business) and withholding taxes. Local governments have various charges ranging from shop permits to park rates. However, BusinessDay found that businesses merely pay money to touts without knowing what they are paying for. Only one out of over 30 small business owners knew what they paid for each day.

Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry, told BusinessDay that one business was served with a paper containing a radio and television charge of N200,000.

“What is troubling is a set of things coming from the local governments,” he said. “Sometimes the rates are not standardised. The taxes are listed, but there is a lot of arbitrariness.”

He called for harmonisation of these taxes as well as the use of automation/technology to plug revenue loopholes in the state.

Lagos is Nigeria’s biggest economy and Africa’s 5th largest in terms of GDP. The state generated internal revenue of N382 billion in 2018, an average of N31.8 billion each month. Apart from leakages in the revenue collection, Lagos’ aggressive tax drive has often been to the detriment of its small businesses.

In the 2019 second quarter survey carried out by the Manufacturers Association of Nigeria (MAN), which houses many small businesses, 95 percent of CEOs said multiple taxation was their biggest impediment.

“There is the need to streamline these taxes and ensure that only approved taxes/levies/fees are charged,” MAN suggested.

Emeka Amadi, group head of tax at United Bank of Africa, suggested the need to clarify the number of taxes to be paid by businesses while also educating them on why they must pay into designated bank accounts.

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