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Small Businesses To Suffer From States’ VAT Regime- Expert

Small Businesses To Suffer From States' VAT Regime- Expert

The Africa Tax Leader at PricewaterhouseCoopers (PwC), Taiwo Oyedele, has predicted that small businesses in Nigeria will suffer more from the new Value Added Tax (VAT) regime embarked on by state governments.

He said small businesses that had been exempted from the National VAT law will be compelled to pay VAT under the state law.

In an article entitled ‘How to fix Nigeria’s broken VAT system’ Oyedele said small businesses will be worse off with the states’ VAT regime as they risk being harassed and extorted for failure to pay.

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The Fiscal Policy Partner said, “Small businesses with turnover not more than N25m that are exempt under the national VAT would have to comply with VAT under the states VAT laws.

“Penalties for failure to register is as high as N50,000 for the first month and N100,000 for each subsequent month while the fine for failure to keep records to ascertain the correct VAT is up to N250,000.

“This penalty regime will weigh heavily on businesses especially SMEs such as barbers, hairdressers, tailors, shoemakers, plumbers, bus and taxi drivers, makeup artists, restaurant owners, etc.

“This further increases the risk of such businesses being harassed and extorted in many states especially those employing tugs to enforce tax compliance.”

Oyedele added that people are likely to pay more especially in states where consumption tax exists, but government will collect less due to inefficiency of collection and leakages.

He said, “There will be higher cost of goods and services arising from input VAT claim and refund complications in addition to items, which are not exempted under the states VAT law such as rent, tuition, processed foods such as amala, suya, jollof rice, and ogbono soup.

“In addition, there will be incidence of double taxation due to likely conflicts between origination and destination principle in different states. Worse still when the reality of inability to implement VAT hits home many states will inevitably introduce sales tax with its cascading effect.”

About Author

Ife Ogunfuwa is an award-winning reporter who is versed in reporting business and economy, technology, gadgets reviews, telecoms, tax, and business policy review, among others. She loves telling stories behind the numbers. She has professional certifications in business and financial reporting. You can reach her via – [email protected]

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