Proposed 5% levy could force companies to flee Nigeria – Afrexim Bank

The proposed 5 percent tax on companies earning over N100 million for community development projects could result in the exits of multinationals from the country, a new report by Afrexim Bank says.

“Nigeria’s National Assembly is considering a 5 percent levy on big companies to invest in community projects, despite opposition from companies and their supporters. Critics argue that companies already pay 20-30 percent of their profits in corporate taxes and the plan could prompt international companies to leave the market,” the report titled Monthly Developments in the African Macroeconomic Environment stated.

However, the bill has faced rejection from the organized private sector. The Manufacturers Association of Nigeria (MAN), which sent representatives to the public hearing organized by the parliament, described the proposal as ill-timed and unnecessary.

They argued that CSR should be at the discretion of each organization, emphasizing that it is an internal matter. Additionally, they expressed concerns about the current multiplicity of taxes and the high operating expenses that manufacturers are already struggling with.

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Member of the House of Representatives, Hon. Olumide Osoba, recently introduced the Corporate Social Responsibility Bill 2023 to set high standards of corporate governance and ensure firms integrate long-term economic, environmental, and social aspects into their business strategies.

The bill includes provisions for establishing a department within the Federal Ministry of Budget and National Planning. This department will be headed by a commissioner appointed by the president based on the budget minister’s recommendation.

The commissioner will coordinate the activities of agencies related to CSR and monitor compliance with the law.

For non-extractive companies with a net worth of N500 million or a net profit of N100 million in a financial year, the bill requires them to form a CSR committee consisting of three or more directors, one of whom must be an independent director. This committee will be responsible for the company’s CSR policy and ensure compliance.