Entrepreneurs operating in Nigeria have welcomed the proposed reduction of Company Income Tax (CIT) for Small and Medium Enterprises (SMEs) from 20 to 15 per cent, but say it is still difficult to register and run businesses in Africa’s most populous nation.
“To the small businesses that are paying taxes, it is an advantage but a large number of SMEs are not paying tax at all it has no difference to them or not. How many registered SMEs are paying the present tax rate? The price of registering as a limited company is expensive,” Damilola Otufodunrin, CEO, DAMSCO, a clothing company that designs men’s wear in Lagos said
“If they really want to favour the SMEs they should provide the basic amenities and infrastructure to boost businesses,” Otufodunrin suggested.
This new policy, if implemented, will help to improve the growth and tax revenue collection of the government
“Apparently for SMEs, the tax levy was 20 percent but the proposal now in the tax policy is to reduce it to 15 percent, as part of the government’s effort to stimulate the economy and get it on the part of growth as well as reduce the tax burden on SMEs,” Kemi Adeosun, Minister of Finance stated this while briefing State House correspondents at the end of the Federal Executive Council’s (FEC) meeting held last week
National Bureau of Statistics (NBS) has shown that over the past five years SMEs have contributed 48 percent of Nigeria’s Gross Domestic Product (GDP).
Business owners have urged the federal government to tackle the bottlenecks and stress of registering businesses in the country so that big organisations can be able to do businesses with SMEs
“The problem why most SMEs are not paying tax is because of the bottleneck and stress that comes when registering businesses,” Temitope Nelson, executive of director, Nelson Impact International, a company that trains on young entrepreneurs
“When it comes to business, most big organisation will not do business with an SME that does not have a corporate account and this is a challenge for SMEs. Most businesses just register half way. In order for you to pay tax, you need your tax identification number and with that you can have a corporate account. But most businesses do not have that,” Nelson also added
Analysts have said that it is good start from the government as this will help them capture the number of businesses available in the country.
Bismarck Rewane, MD, Financial Derivatives Company of Nigeria said, “It is a good beginning from the part of the government because sooner or later people will come out and pay their tax because they need to get their tax clearance certificate to apply for things. Then we will be able to get more reliable data of businesses in the country.”