FG Agrees to Reduce Income Tax for MSMES

The Federal Ministry of Finance said the federal government would propose a reduction in the income tax rate, as part of strategies to encouraging compliance by the operations of Micro, Small, and Medium Enterprises (MSMEs) in the country.

Kemi Adeosun, minister of Finance, disclosed the strategic plan during a Public-Private Dialogue recently held in Lagos on Tax and Regulatory Framework for Micro Small and Medium Enterprises in Nigeria.

Adeosun who was represented by Hajia Larai Shuaibu, Director Technical Service Department,‎ said “federal and state Tax authorities should respond promptly to the changing business environment as it affects tax administration and develops a useful framework to meet the taxpayer demands in this respect.

She explained that the qualification for the lower income tax rate applicable to small businesses should be a review in line with current economic realities. "The Income tax rate for small businesses should be further reduced as an incentive to encourage compliance and promote Micro, Small and Medium Enterprises, (MSMEs)," she said.

She urged tax authorities to establish administrative framework for amnesty and whistleblowing as part of the strategies for curbing evasion and widening the tax net.‎

In a paper presentation, Seye Arowolo, Akintola Williams Deloitte, said that MSMEs in Nigeria are still battling with issues relating to taxes which affected their performance.

"MSMEs have not performed credibly well and hence have not played the expected vital and vibrant role in the economic growth and development of Nigeria. We have 27.7 percent of registered businesses in Nigeria pay taxes out of the recorded number of 450, 000. This is probably because of a real disconnect between policy intent and the realities of MSMEs."

“Any business battling with for survival will find it easy to evade tax, however, one of the challenges of MSMEs is the huge percentage requested by the federal government. Other problems include over-regulation, unfavorable fiscal policies along with regulatory frameworks.”

“In order to unleash the potentials of MSME for the benefit of Nigeria’s economy, it is germane for the government to revisit its approach to the challenges of the MSME sector,” he said.

In his remarks, Degun Agboade, president and chairman of the Council of Nigerian Association of SME, stated that statistical indicators on the potentials of the sector toward job creation, poverty reduction, and economic growth.

These data continued to show positive trends and its expected contributions to the country Gross Domestic Product (GDP). “The current stagnation is facing MSMEs resulting from multiple taxes, levies, fees, permits, etc. should not be overlooked. Adding that, if the taxes log level on them is mitigated the result will be enormous and unprecedented.

On his part, Mr. Seye Arowolo, Partner Akintola Williams Deloitte,  said that “MSMEs have not performed credibly well and hence have not played the expected vital and vibrant role in the economic growth and development of Nigeria.

“Currently, only about 27.7 percent of registered businesses in Nigeria pay taxes out of the recorded number of 450, 000,” Arowolo said

He also said: “This is probably because of an existing or perceived disconnect between policy intent and the realities of MSMEs. “The challenges of MSMEs in Nigeria, ranges from over regulation, FOREX shortage and dependence on imported raw materials, multiple and high taxes, with unfavourable fiscal policies along with regulatory frameworks.”

He recommended that a special MSME tax regime where MSMEs will not be accessed under the provision of either PITA or CITA, but on new tax and regulatory framework dedicated to MSME in clear and definite terms.

“To unleash the Potential of MSME for the benefit of Nigeria’s economy, it is imperative for the government to revisit its approach to the challenges of the MSME sector,” he said.