The Minister of Finance, Kemi Adeosun, said that the federal government will propose reduction in the income tax rate applicable to the Micro, Small and Medium Enterprises, MSMEs, as an incentive to encourage “The qualification for the lower income tax rate applicable to small businesses should be 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 compliance and promote the sector.
The minister stated this in Lagos southwest Nigeria, at a Coalition of MSMEs stakeholder Public Private Dialogue, (PPD) on Tax and Regulatory policy framework for MSMEs in Nigeria.
She said: “There should be a minimum threshold for VAT registration and compliance in order to protect Micro, Small and Medium Enterprises in Nigeria.“Tax authorities should establish administrative framework for amnesty and whistle blowing as part of the strategies for curbing evasion and widening the tax net,” she stated.
The minister also said that “Federal and State Tax authorities should respond promptly to the changing business environment as it affects tax administration and develop a workable framework to meet the tax payer demands in this respect.
“The Ministry of Finance shall work with the Legislature to ensure that the requisite changes tax laws are enacted together with the appropriation act of the same year.
This would require the executive to timely present tax laws as executive bill for the timely consideration of the National and state house of assemblies,” she said.
In his welcome address, the President and Chairman of the Council of Nigerian Association of SME, Mr. Degun Agboade, said that statistical indicators on the potentials of the sector toward job creation, poverty reduction and economic growth have continued to show positive trends and its expected contributions to the country Gross Domestic Product (GDP).
He noted that, “the need for a conducive operating environment for MSMEs cannot be overemphasized. “The current stagnation facing MSMEs resulting from multiple taxation, levies, fees, permits etc should not be overlooked. Adding that, if the taxes log level on them is mitigated the result will be huge and unprecedented.
On his part, Partner Akintola Williams Deloitte, Mr. Seye Arowolo, 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.”
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