Effect of Multiple Taxation on Business Survival in Nigeria

Tax Blog Consulting STRANSACT

As a professional services firm operating in Nigeria, we have observed with great concern the negative impact of multiple taxation on the survival and growth of businesses in the country. Multiple taxation refers to the situation where businesses are subject to various taxes and levies imposed by different levels of government, resulting in a significant burden on their financial resources.

The effect of multiple taxation on businesses in Nigeria cannot be overemphasized. It creates an unfavorable business environment, stifles investment, and ultimately leads to the closure of businesses. Small and medium-sized enterprises (SMEs) are particularly vulnerable to this phenomenon. These businesses are the backbone of the Nigerian economy, employing millions of people and contributing significantly to the country's GDP. However, they face the greatest challenge in terms of multiple taxation.

Effects of Multiple Taxation on Business Survival in Nigeria:

Firstly, it increases the cost of doing business. Businesses are required to pay various taxes and levies to different levels of government, which increases their operating costs and reduces their profit margins. This makes it challenging for businesses to survive, particularly during tough economic times.

Additionally, multiple taxation creates a burden on businesses' cash flow. SMEs often operate on tight budgets, and paying multiple taxes and levies at different times of the year can be challenging for them. This can lead to cash flow problems, which can ultimately affect their ability to pay their employees, suppliers, and creditors. If left unchecked, this could result in the closure of the business.

Moreso, multiple taxation leads to reduced competitiveness. When businesses are subject to multiple taxes and levies, it reduces their ability to compete with businesses operating in other countries. This is because the cost of doing business in Nigeria becomes higher than in other countries. This could result in businesses relocating to other countries with more favorable tax regimes, leading to a loss of jobs and revenue for the Nigerian economy.

Solutions to Address Multiple Taxation in NIgeria

Harmonization of taxes and levies: This will ensure that businesses are not subject to multiple taxes and levies at different levels of government. Harmonization will help reduce the burden on businesses and create a more favorable business environment.
Reduction in the number of taxes and levies: The government should consider reducing the number of taxes and levies imposed on businesses to make the tax system simpler and less burdensome. This will make it easier for businesses to comply with tax regulations.
Simplification of the tax payment process: The process of paying taxes and levies should be made more straightforward and less cumbersome to reduce the burden on businesses. This will help businesses to save time and resources that can be channeled into other productive activities.
Increase in tax incentives: The government should provide more tax incentives to businesses, particularly SMEs, to encourage investment and promote economic growth. Tax incentives will help businesses to reduce their tax burden and increase their profitability.

Multiple taxation is a significant threat to business survival in Nigeria. It is essential for the government to take proactive steps to reduce the burden of multiple taxation on businesses by implementing the solutions highlighted above. By doing so, the government will create a more favorable business environment, encourage investment, and ultimately promote economic growth in Nigeria.

At Stransact (Chartered Accountants), we specialize in tax advisory services and can provide insights and consultation on how businesses can effectively plan their taxes and reduce losses due to taxation and multiple taxation. Contact us today for more information on how we can assist you. Together, we can help create a more conducive business environment for businesses in Nigeria, leading to increased economic growth and prosperity.