At Oshodi in Lagos State, a roadside leather shoes seller, Mr Samuel Oguntoye, pays 7 different taxes every week.
He spends more than N6,000 each week on local government tax, land use tax, sales tax, parking permit, radio and television permits as well as market tax.
He does not receive receipts for any of these taxes and hands the money directly to the fierce-looking men who collect them.
“Each day, I pay N1,400 from Monday to Friday, and N1,000 every Saturday,” he told Economy Post.
“If I refuse to pay, there will be no business for me that day,” he added.
Nigerian micro, small and medium enterprises (MSMEs) collectively pay more than 100 taxes for federal, state and local government taxes, Economy Post checks have shown.
In Lagos alone, the number of taxes paid by MSMEs ranges from 20 to 40, with some of them not recognised by the government.
For instance, local governments in Lagos request shop and market levies from small businesses, while the state government demands signage tax. The Federal Government demands value added tax and stamp duty, among others.
Recognised taxes paid by MSMEs in Lagos range from shop rate, trade permit, lock-up shop, Lagos State Signage & Advertisement Agency (LASAA) rate to local government ticket, parking permit and land use charge.
Others are: animal trade tax (butchers), produce sales tax (manufacturers), fire service charge, market charge, monthly trade rate, property tax, economic development levy, fire service charge, event centre/hotel tax, social services levy, radio tax, among others.
However, MSMEs pay several illegal taxes and levies in Lagos, with several of them complaining of multiple taxation from touts.
“In a day, I pay N2,400 to eight sets of touts, also known as ‘agberos.’ If I don’t pay, they will carry off my goods,” a woman who sells clothes at CMS in Lagos, Ms Deborah Oke, told Economy Post.
Like Oguntoye, she noted that the touts neither offered them receipts nor anything to show proof of payment of those taxes.
“The only thing they do is to identify anybody who pays or does not pay. They know when a business has not paid because they are stationed there forever,” she noted.
She lamented that taxes paid each day constituted half of her profit.
“I make N5,000 most times on profits but pay almost half to touts. Due to this, I struggle to pay the school fees of my four children,” Ms Oke, a widow, bemoaned.
Lagos is Nigeria’s richest state, with a gross domestic product (GDP) of $133 billion. In 2021, the reporter found that the average tax paid by a small business in Lagos was N513 daily and N186.219 million annually.
A trader at Ojuelegba in Lagos, Mr Emeka Johnson, said he paid more than 9 taxes every day, including settlement and ticket taxes.
“I pay N1,100 to N1,400 every day,” Johnson, a roadside textile retailer, said.
However, these two taxes are not recognised by the state or Surulere Local Government where it is located. In places like Ikeja, MSMEs pay land charges for simply displaying their wares.
Same in other states
In Rivers State, MSMEs pay land use tax, community tax, hotel rate, development levy, ‘youths tax’, local government tax, settlement levy, among others.
In Anambra State, MSMEs pay shop rates, land use charge, withholding tax, gaming permit, property tax, road tax, value added tax, among others.
In Kano, businesses pay land use charge, development levy, shop rate, market rate, lotteries/casino tax, hotel rate, among others.
In some parts of the North such as Taraba and Adamawa, traditional rulers collect taxes from shop owners.
The Centre for Promotion of Private Enterprise found that there are over 150 taxes paid by MSMEs in Nigeria.
Economy Post checks found that there are more than 100 taxes in 36 states of the federation, including radio and television levies in Lagos.
Money goes into private pockets</strong
While MSMEs pay these huge taxes, some of them go into private pocket
in 2021, this reporter was told to pay the shop rate and the trade permit into personal accounts of officials of Amuwo Odofin and Surulere local governments, even though there were official government bank accounts displayed on both council areas.
Two years earlier, the reporter had been asked to pay a LASAA fee of N15,000 into an account of a woman in Isolo Local Government Area of Lagos State.
At Mushin, the reporter met a man, who worked as a member of the taskforce. The man asked the reporter to pay a parking permit of N30,000 and shop fee of N5,500 into his personal account.
Virtually all the officials of local councils visited by this reporter for all the undercover stories on taxation in Lagos wanted public taxes to be paid into their personal accounts.
MSMEs struggling in Nigeria
There were about 41.5 million MSMEs pre-2021 but this number has reduced by 2 million, according to the Small and Medium Enterprises Development Agency (SMEDAN).
These 2 million businesses died owing to issues ranging from multiple taxation, lack of power and funds as well as a poor doing business environment, experts say.
Banks’ discriminatory credit
Credit is a major problem for MSMEs. Monetary policy rate, which is the benchmark interest rate, has risen from 11.5 percent in March 2022 to 18.75 percent in July 2023. The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), which was supposed to have sat twice to determine the rate, did not meet owing to a change of leadership.
However, banks are among MSMEs’ biggest headaches. Zenith Bank granted over N3 billion loans to its directors and key management staff in 2023 at an average interest rate of 4 percent, but charged MSMEs 27 percent to access credit facilities, Economy Post had earlier reported.
Access Bank granted loans to its associates and management personnel at 8 percent interest rate in the first six months of 2023, while providing the same support to customers and businesses at rates between 27.6 percent and above, Economy Post had also earlier reported.
This is happening across several banks.
Founder of Livestock247.com, Mr Ibrahim Maigari Ahmadu, Nigeria’s first livestock online marketing and listing platform, argued that apart from the fact that bank interest rates were high, access to those funds was not easy.
“Many of the Nigerian commercial banks are risk-averse. They have erected so many gridlocks to make it hard for those seeking those funds,” he said.
Digitise the process
Tax experts want taxes paid by MSMEs to be digitised. A tax expert and accountant, Mr Olalekan Saidi, said there was a need to digitise the tax collection process at all levels of the government.
“There is also a need for everyone to be aware of where and how to pay taxes,” he said, stressing the need to avoid paying taxes wrongly.
“It is also important to also get tax experts to help you to navigate the process,” he counselled.
Another tax expert, Ms Esther Bolarinwa, called for state and local governments to plug the loopholes with a digitisation of the processes.
“Make it compulsory for everyone to pay taxes digitally through online platforms or the banks,” she said
“This will enable you to make more money and reduce wastages.”
No multiple taxation in Lagos, says governor
Lagos Governor, Mr Babajide Sanwo-Olu, however, denied there was multiple taxation in Nigeria’s largest state.
In his response to allegations of multiple taxation in his state, Sanwo-Olu said recently, “We will make sure that there is ease of doing businesses, especially start-ups that are always scared that they have multiple taxation. There is nothing like multiple taxation in Lagos.
“It is clear that they are exempted but that doesn’t stop them from doing proper filing and ensure transparent reporting at whichever level of their business.
“We will also use this opportunity to encourage our citizens that it is only when they play their own part as responsible citizens both at the corporate and individual level that the government can come up and discharge its responsibilities.
“Development is by tax and it is only when we collect reasonably amount of tax that we can introduce development, both at infrastructure level and more importantly on security, so we cannot but ensure that we collaborate and corporate with you.”
Culled from Economy Post and republished with the author’s permission.
