The Centre for the Promotion of Private Enterprises (CPPE) has called for the review of Nigeria’s tax laws, saying that the corporate tax at about 34 percent represents the highest globally.
The firm noted that the current tax regime stifles investment, saying that an economy that desires job creation, economic inclusion, investment growth and poverty reduction, should have an accommodating tax regime for investors.
The firm disclosed these in its Economic Review for 2022 and Agenda for 2023 signed by its Director, Muda Yusuf, arguing that the current tax regime is in conflict with the National Tax Policy which emphasizes incentivising investments through less direct taxation.
CPPE also called for a reduction in the Cash Reserve Ratio (CRR) imposed on deposit money banks, saying that high CRR is not only an impediment to banks’ financial intermediation, but adversely impacts their profitability as there’s no room for credit creation by the banks.
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He said: “Corporate tax in Nigeria is 30 percent. But effective corporate tax is much more than that. There is a tertiary education tax of 2.5 percent of profit; National Information Technology Development Agency (NITDA) levy of 1 percent of profit; National Agency for Science and Engineering Infrastructure (NASENI) levy of 0.25percent of profit; Police Trust Fund levy of 0.005 percent of profit. This brings effective corporate tax to about 34 percent.
“This rate is one of the highest in the world. Average corporate tax rate for Africa is 27.6 percent; Asian average is 19.52 percent; European Union is 19.74percent and global average is 23.37percent. Meanwhile new taxes are still being proposed by the National Assembly. These include Tertiary Health Tax of 1 percent of profit; and NYSC levy of 1 percent of profit. There are numerous other taxes imposed on businesses by the states and local governments.
“This multitude of taxes is crippling investment in the Nigerian economy. There is the need for an urgent review. The current tax regime is in conflict with the National Tax Policy which prescribes that there should be less emphasis on direct taxation in order to incentivise investment.”
On CRR requirements, he said: “The current Cash Reserve Ratio [CRR] of 32.5percent and Monetary Policy Rate [MPR] of 16.5 percent imposed on the Nigerian banks are among the highest globally. High CRR in particular has become a key impediment to financial intermediation by the banks. Even more disturbing is the fact that effective CRR is as high as 50 percent or more for some banks.
