The argument by the Organisation for Economic Cooperation and Development (OECD) that tightening South Africa’s wealth tax regime would rebalance ... generational inequality has a fundamental flaw: it targets a “flighty” base, says an expert from the African Tax Institute.
However, Bailey’s profit is eroded by multiple levies forced on her by notorious Lagos tax collectors, who have threatened her and taken her stock when she refused to pay.
“I used to pay five or six of these taxes every day. Now, I pay up to eight. I spend nearly N1,200 on different faceless groups,” says Bailey.
Ordinarily, Bailey is only supposed to pay the local government levy, a shop permit and a state government tax, but the collectors request taxes, such as ‘outside shop levies’, ‘land levies’, ‘caution fees’ and more.
“It does not matter what you sell, all they want is money,” says Bailey. “Even if you sell two boxes of matches, you must pay them. Many traders have left Lagos because of this unfair treatment. It feels like we are working for them.”
Personal bank accounts
James Ajiukwu, a point-of-sale agent at Ladipo Market for one of the tier-two Nigerian banks, is forced to part with N900 every day, which is collected by five different groups known in local parlance as agberos.
“Sometimes, they carry [away] my point of sale machine if I do not pay and I won’t do business that day,” he says.
A spot check at Mushin Local Government Area, where Ladipo Market is located, reveals that there is neither a local government fine nor an outside shop fine in the list of taxes paid by businesses within the local government.
They do not issue receipts, but they claim to work for the government…
In other areas, on two separate occasions, officials in Surulere and Amuwo-Odofin areas in Lagos provided personal bank account details – not government accounts – to pay erroneous fees by someone impersonating a street vendor.
The incidents were reported to the chairpersons of the local governments, but they did not take any action.
“They do not issue receipts, but they claim to work for the government. Half of my profits go to all these individuals, and none of this is legal,” says Ajiukwu.
Highest number of MSMEs
With a gross domestic product of $136bn, Lagos is Nigeria’s biggest economy, according to the National Bureau of Statistics.
It hosts major business clusters, including Ikeja and Apapa industrial zones as well the Lekki Free Zone.
Lagos has 8,395 small and medium businesses plus 3.329 million micro enterprises, according to a 2017 joint study by the Small and Medium Enterprises Development Agency of Nigeria and the National Bureau of Statistics.
These are mostly illegal taxes so it is hard to predict whether they are for elections or not.
This represents 8% of 41.5 million small businesses in Nigeria, which contribute 50% to the GDP and 86% of the total employment.
However, erroneous taxations and unfavourable government policies are two of the major challenges facing small businesses in Africa’s most populous nation, says the study.
An investigation by the International Centre for Investigative Reporting says each micro or small business in Lagos pays at least N513 every day.
Segun Kuti-George, the former president of the National Association of Small Scale Industrialists, Lagos State chapter, says SMEs in Lagos and every other part of Nigeria is hampered by multiple taxes and harsh operating environments. He identifies regulation and foreign exchange as the other two major issues hurting the growth of the sector.
“These are mostly illegal taxes so it is hard to predict whether they are for elections or not. However, I have seen where individuals collecting these illegal taxes in Lagos grew to become powerful political office holders,” says Uche Nwogwugwu, a professor of economics at Nnamdi Azikiwe University.
“They undermine economic growth in Nigeria, and Lagos is not an exception.”
Lack of efficiency
Meanwhile, tax collection in Nigeria only contributes 9% of GDP, according to Nigeria’s Debt Management Office. This is lower than Ghana’s 13%, Kenya’s 16.6%, and Angola’s 20.9%.Taiwo Oyedele, a partner and head of tax and regulatory services at consulting firm PwC, says the problem is that most of the taxes collected in Nigeria are not remitted to the government coffers. He insists that a lot of taxes are being collected by several amorphous groups that are helping themselves to the funds.
“We have a lot of leakages in our tax collection, which needs to be plugged,” Oyedele says.
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