Paying taxes in
Nigeria is one of the inevitable duties of every business owner yet an unwanted
obligation, irrespective of whether the business is extremely profitable or is
in losses. However, for a number of reasons, many businesses in Nigeria do not
pay any taxes to government or fail to remit the right amount of taxes. This is
often driven by lack of knowledge on the income that should be taxed, difficulty
with making payments, poor management of tax revenue by the government, amongst
others.

While MSMEs may have
several self-developed justifications for not paying taxes, it is important to
note that the obligation to pay taxes is a civic duty and there are many
benefits to business owners such as:

• Improved
  infrastructure and social amenities: The provision of improved
  infrastructure and social amenities (i.e. hospitals, clean drinking water,
  electricity, road, schools…) require large capital spending which can only be
  provided by the government. The major source of income for the Government is
  tax revenues. Hence, every tax payer in Nigeria, including MSMEs, must play
  their part by contributing the right tax to ensure every Nigerian citizen
  benefits from good infrastructures and social amenities. 

• Access
  to finance: An MSME that
  remits its taxes has the opportunity to access loans and attract investors, especially
  institutional investors. Institutional investors such as Banks, microfinance
  banks, government request for tax clearance certificates (TCC) as evidence of
  tax compliance as part of the loan application documents. Hence, a MSME that
  wishes to expand its business should pay its taxes.

• Prevent
  additional costs: An MSME is exposed
  to additional tax liability arising from penalties or fines and interest in the
  event of non-payment of tax due. This could put further pressure on the on the
  finance of the MSME and obstruct growth of the business. It is therefore, important
  that MSMEs remit applicable taxes to the relevant tax authority as at when due
  to avoid paying penalties and interest which may lead to shutdown of the
  business.

• Avert
  disruption of business activities: In recent times, we have seen revenue authorities seal up
  business premises and seize goods of businesses without prior notice where the
  owners have not paid any tax or fail to pay the correct tax due. This unplanned
  closure disrupts business activities and may cause business owners to lose
  customers which may in turn lead to a shutdown of the business as its owners
  are unable to trade and raise the required funds to meet their outstanding tax
  payments. Hence, MSMEs should ensure they pay their taxes as at when due to
  avoid building up huge tax liabilities which may in turn threaten the going
  concern of the business.

• Access
  to engage in various transactions: The law has necessitated that several transactions can only
  be applied for upon presentation of a TCC as confirmation from the revenue
  authority that a business is paying its taxes. It is important to note that
  these transactions are off limit to MSMEs who fail to remit any tax or fail to
  remit the correct tax. these transactions include: 

  • application for
    award of contracts by government agencies and registered companies

  • application for
    government loan for industry or business

  • application for
    registration of a limited liability company or of a business name

  • application for
    import or export license

  • application for
    trade license

  • application for
    certificate of occupancy

  • application for
    registration as a contractor

  • registration of
    motor vehicle and change of ownership of vehicle by the vendor

  • application for
    approval of building plans

  • application for
    transfer of real property

  • stamping of
    guarantor’s form for a Nigerian passport

  • application for
    allocation of market stalls

  • application for
    foreign exchange to remit funds outside Nigeria

  • appointment or
    election into public office; etc.

 It is important to
keep in mind that paying taxes creates a win-win situation for all, as revenue
generated from taxes significantly impacts government’s ability to ensure
availability of adequate infrastructure, provides an enabling environment for
businesses to thrive and ultimately gives business owners access to greater
opportunities. Despite these seeming reasons, it is an offence not
to pay your taxes. The government has been magnanimous and introduced a
voluntary assets and income declaration window and encourages every tax payer
who has not been compliant in the past to disclose the same by 31 March 2017
and have any penalty and interests waived. Start today to pay your taxes and
see your business grow.