Why Nigerian SMEs don’t survive operation, by Tony Elumelu
Mr. Tony Elumelu, the Chairman, Heirs Holdings, on Thursday, blamed multiple taxes and levies from government for the death of about 95 per cent of Small and Medium Enterprises (SMEs) within their first one year of operation in Nigeria.
Elumelu said this at the Lagos Business School Alumni Association (LBSAA) “2017 Alumni Day” in Lagos with the theme, “The Effects of Multiple Government Regulations and Taxation on Business Growth in Nigeria”.
He said 5 per cent of the small businesses that survive after one year were a big disincentive to the nation in terms of employment creation.
Elumelu said that multiple business regulation, multiple taxation and inconsistent government policies affect SMEs’ competitiveness. According to him, multiple levies by the government and its agencies affect small businesses’ ability to attract capital in their investment climate.
The Heirs Holding boss also lamented that despite multiple taxes and levies in the country, Nigeria remained the lowest in the world with 10 per cent tax contribution to Gross Domestic Product (GDP).
“It seems we have a big problem with high taxation and multiple levies; it is expected we should have very high tax revenue,’’ he said. According to him, government should find out the reason for the discrepancy for desired growth and development.
He urged government to create a more conducive environment that would encourage survival of SMEs in order to reduce unemployment rate.
“Governments don’t create jobs, it is the right enabling environment for SMEs that create jobs,’’ he said, adding that public and private sector partnership was necessary to tackle the challenges facing the country.
“Issue of multiple taxation is enormous and must be addressed to achieve the desired growth,’’ Elumelu stated. He called on the government to streamline all taxation and levies across the three tiers of government to avoid collapse of SMEs.
Elumelu said that government must leverage technology to foster automation in tax collection to reduce tax leakages, stating further that government should ensure greater awareness to approved taxes and levies to avoid extortion as well as introduce tax incentives.
Elumelu said that those who pay taxes should be recognised and encouraged for people to embrace and pay taxes without being forced. According to him, government should go beyond focus on operational approach of collecting taxes and find a way of encouraging people to pay taxes.
He also called for a comprehensive review of tax laws in the country to improve revenue and check excesses at the nation’s ports to improve foreign exchange earnings.
The chairman commended the Federal Government for policies introduced to improve ease of doing business, noting that the measures should be sustained.
Elumelu, however, commended the Lagos Business School (LBS) for creating the platform and opportunity for economic development, saying that LBS was assisting organisations to grow through the development of human capital.
“To improve performance, you must have the right people to sharpen competitiveness,” Elumelu said.
Mr. Taiwo Oyedele, the Head of Tax and Corporate Advisory Services, PwC Nigeria, called for the amendment of the country’s constitution to ensure coordination among the three tiers of government and its agencies.
Oyedele said that multiplicity of government agencies with the same work function was becoming worrisome, noting that, “you don’t need tax incentives for people to do business, we just need to remove the disincentives.”
Sir Ndukwe Osogho-Ajala, Chairman/Chief Executive Officer, Soulmate Industries Ltd., said that government needs to encourage SMEs to prosper for them to be able to pay taxes.
Osogho-Ajala said that government should embrace measures adopted in other countries to grow tax revenues instead of concentrating on closure of companies that failed to pay taxes.
“You need to grow revenue before you can collect. We are not growing revenue in Nigeria and that is why people fail to pay taxes. You don’t shut a place that is generating employment, you should allow them to make money to pay tax,” he stated.
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