The newly passed tax laws, according to the Manufacturers Association of Nigeria and Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reform, were intended to assist Nigerian companies in recovering, regaining their competitiveness, and growing from the domestic market into regional markets after years of distortion brought on by numerous taxation and policy inconsistencies.
The Chairman of the Presidential Committee on Fiscal Policy and Tax Reform, Oyedele, stated at MAN's hybrid stakeholders' engagement in Lagos on Thursday, "Legislative Assembly to Factory Floor: What the New Tax Laws Mean for Nigerian Manufacturers," that the previous tax system had rendered Nigerian manufacturers uncompetitive even within their own nation.
The goal of the new laws, according to Oyedele, is to restore competition, beginning with the local market. Even after freight, insurance, and tariffs, manufacturing in Nigeria is still more affordable than importing alternatives. It indicates that we are having difficulty competing even in our own market.
"We want our businesses to compete first locally, then within the region, especially under the African Continental Free Trade Area," he stated, cautioning that if reforms were not implemented, Nigeria may lose jobs and investments to its neighbors.
He claimed that the system was "broken," pointing out that a combination of legal and illegal taxes imposed by state and non-state entities resulted in disproportionately higher effective tax rates for manufacturers.
"We were taxing capital," stated Oyedele. Investments were being taxed. Nigeria has one of the highest corporate profit tax rates in the world. Everywhere they looked, manufacturers had to cope with a variety of levies, and even legitimate taxes were being unlawfully collected. For us, this was not working and would not continue to do so.
He emphasized that increasing company output would eventually result in more revenue for the government and clarified that the reforms were based on economic growth rather than punitive taxation. "The government will earn a lot more money if it creates an atmosphere that encourages company growth, even at a lower tax rate. Every successful nation has progressed in this manner, according to Oyedele.
The tax czar went on to say that the changes also addressed policy distortions, such as abuses in free trade zones, fiscal equity, and tax fraud. "Free zones are meant to produce for export, not to sell into the domestic market and compete with companies paying full taxes," he stated. The playing field isn't level.
He revealed that the laws, which were built on MAN's long-standing complaints about excessive taxation, sought to lower overall taxes and levies across all levels of government to single digits.
He pointed out that although some nuisance taxes were included in the Constitution, the committee has proposed their removal to the National Assembly as part of ongoing constitutional revisions.
Oyedele added that numerous states had already started enacting associated legislation and that the reforms respected constitutional constraints by encouraging states to domesticate harmonized tax rules rather than imposing federal instructions.
Francis Meshioye, the president of MAN, called for state governments to completely domesticate and implement the new tax legislation, citing their own economic interests as justification. In terms of tax reform, it will create a new business climate and boost trust in public policies. Governments will profit more from a greater volume of activity rather than higher rates when firms do more, he said.
A favorable tax climate, according to Meshioye, would unlock a number of advantages, such as the creation of jobs, increased output, and stronger value chains in the manufacturing and service industries.
The government will make more money from increased economic activity if the business environment is more favorable, he said.
Furthermore, Segun Ajayi-Kadir, Director-General of MAN, said that sub-national governments' complete cooperation was necessary for the reform to succeed. "We are pleased that at least ten states have enacted legislation that is completely in line with the federal framework," he stated.
This will aid in the removal of unlawful collection methods and nuisance taxes, which have long plagued manufacturers.
Ajayi-Kadir stated that the states' voluntary domestication of the legislation represented progress and that without sub-national support, the reforms would be worthless. "It's encouraging for manufacturers and the sustainability of the tax reform agenda that states are now enacting these laws independently," he stated.
