HOW TO AVOID MULTIPLE TAXATION
What is Multiple taxation?
Multiple taxation refers to the situation where businesses are subject to various taxes and levies
imposed by different levels of government, resulting in a significant burden on their financial resources.
The effect of multiple taxation on businesses in Nigeria cannot be overemphasized. According to the
National Tax Policy Document, multiple taxations occur where the tax is levied on the same person in
respect of the same liability by more than one State or Local Government Council.
Understanding Multiple Taxation in Nigeria:
Multiple taxation in Nigeria stems from the concurrent jurisdiction of different levels of government to levy taxes on various economic activities and assets. At the federal level, the Federal Inland Revenue Service (FIRS) administers taxes such as corporate income tax, value-added tax (VAT), and withholding tax. State governments also impose their taxes, including personal income tax, land use charge, and consumption taxes. Additionally, local governments may levy taxes such as property tax and tenement rates. As a result, taxpayers often find themselves subject to multiple taxes on the same income, transaction, or property, leading to duplication of tax liabilities.
Factors Responsible for Multiple Taxation in Nigeria
It has been argued commonly by the aggrieved persons and organizations over imposition of too many
taxes; and that many state taxes, especially those imposed on companies are often a duplication of
taxes already levied by another tier of government or by the same Government but under different
names. Different factors have been identified as responsible for multiple tax practices in Nigeria among
which are:
Unfair revenue formular
Dwindling of State income from the central fund
Unhealthy State rivalries
Political patronage
Source of reimbursing so called political god-fathers
Lack of political will to stop multiple taxation by some State and local governments
Poor equipping and training of revenue agencies staff and greed on the part of tax officials.
In addition, common reasons adduced for the disposition of many states and local councils towards the
adoption of various taxes and levies can be attributed to the following factors:
Poor tax administration
Unfavorable revenue allocation formula and
Corruption among tax officials
Tips to avoid multiple taxation:
1. Understand your tax obligations: Familiarize yourself with the tax laws in your country and state.
Knowing what taxes you are required to pay can help you avoid duplicate payments.
2. Keep accurate records: Maintain proper records of your tax payments, including receipts and invoices.
This will help you prove that you have already paid your taxes.
3. Take advantage of tax credits: Claim available tax credits, such as deductions for charitable donations
or business expenses, to reduce your tax liability.
4. Consult a tax professional: If you’re unsure about your tax situation, consider consulting a tax
consultant or accountant like SOW Professional. They can help you navigate the tax system and ensure you’re not paying
multiple taxes.
5. Stay informed: Stay up-to-date with changes in tax laws and regulations. This will help you avoid
unexpected taxes and penalties.
6. Advocacy and Industry Collaboration: Advocate for reforms that address the issue of multiple taxation in Nigeria. Collaborate with industry associations and business groups to push for policy changes that promote a more harmonized and fair tax system, reducing the burden of multiple taxes on businesses and individuals.
7. Tax Planning: Implement tax planning strategies that optimize your tax position while ensuring compliance with the law. This may involve structuring your business operations in a tax-efficient manner, taking advantage of available deductions and incentives, and exploring legitimate tax planning opportunities.
8. Engage with Tax Authorities: Establish a proactive relationship with tax authorities at both the federal and state levels. Seek clarification on any tax issues or obligations that may arise and ensure compliance with their requirements. Regular communication can help to address any concerns about multiple taxation and resolve disputes amicably.
Solutions to Address Multiple Taxation in Nigeria
1. Harmonization of taxes and levies: This will ensure that businesses are not subject to multiple taxes
and levies at different levels of government. Harmonization will help reduce the burden on businesses
and create a more favorable business environment.
2. Reduction in the number of taxes and levies: The government should consider reducing the number of
taxes and levies imposed on businesses to make the tax system simpler and less burdensome. This will
make it easier for businesses to comply with tax regulations.
3. Simplification of the tax payment process: The process of paying taxes and levies should be made
more straightforward and less cumbersome to reduce the burden on businesses. This will help businesses to save time and resources that can be channeled into other productive activities.
4. Increase in tax incentives: The government should provide more tax incentives to businesses,
particularly SMEs, to encourage investment and promote economic growth. Tax incentives will help businesses to reduce their tax burden and increase their profitability.
5. Taxpayer Advocacy Groups: Encourage the formation of taxpayer advocacy groups or associations to represent the interests of taxpayers and advocate for tax reforms. These groups can serve as watchdogs to monitor tax policies and practices, raise awareness about issues of multiple taxation, and engage with policymakers to propose solutions.
6. Strengthening Dispute Resolution Mechanisms: Enhance the effectiveness of dispute resolution mechanisms to address instances of double taxation promptly. This could involve establishing specialized tax tribunals or arbitration panels with the authority to adjudicate disputes and provide timely resolutions.
7. Engagement with Stakeholders: Foster dialogue and collaboration between government agencies, business associations, civil society organizations, and other stakeholders to address the root causes of multiple taxation. Joint efforts can lead to the development of comprehensive solutions that balance the need for revenue generation with the imperative of promoting investment and economic growth.
Conclusion
Multiple taxation is a significant threat to business survival in Nigeria. It is essential for the government to take proactive steps to reduce the burden of multiple taxation on businesses by implementing the solutions highlighted above. By doing so, the government will create a more favorable business environment, encourage investment, and ultimately promote economic growth in Nigeria. Remember, tax laws and regulations can change, so it’s essential to stay informed and seek professional
advice when needed.
At SOW PROFESSIONAL SERVICES LTD, we specialize in tax advisory services and can provide insights and
consultation on how businesses can effectively plan their taxes and reduce losses due to taxation and
multiple taxation.
For more information on How to avoid multiple taxation, kindly contact us at :
E-mail: care@sowprofessional.com
Website: www.sowprofessional.com
Phone: 07038254989
Whatsapp: 07038254989
