Tax Issues That Affect SMES

Ignorance of tax obligations, particularly in the informal sector, is one of the challenges militating against business success, IFE ADEDAPO writes
Inadequate knowledge of tax and levies obligations by business managers, especially those in the informal sector, has left some of them at the mercy of people who pose as tax officials and exploit them.
It has been learnt that most tax collectors play on the ignorance of most business owners and impose exorbitant taxes and levies on their businesses.
Women, especially those in the informal sector, often bear the brunt of this problem due to the ignorance of their tax obligations and the amount expected to be paid.
Speaking at a tax sensitisation forum recently, the President, NECA’s Network of Entrepreneurial Women, Mrs. Mrs. Lola Okanlawon, said that a higher percentage of women entrepreneurs were in the informal sector.
As a result, she advocated a gender desk in the Lagos State Internal Revenue Service so that businesses could be conducted with ease and tax payment stress-free.
The Deputy Director, New Growth, Lagos State Internal Revenue Service, Mr. BicciAlli, says that tax revenue forms a higher percentage of the income of every state.
He adds that states that have not been enforcing compliance with tax remittance are the ones owing workers salaries. Alli reiterated that taxation was critical for businesses because funds from it would be used by the government to provide enabling environment for them to operate.
He says, “The government cannot run a legal and a judicial system efficiently without funds from taxes. It cannot enforce compliance with regulations; therefore it is important to pay tax.”
Issues of multiple taxes explained
Explaining the issues concerning multiple taxation, the deputy director says that the federal, state and local governments have different taxes and levies they control. He advises business owners to pay their taxes to the tier of government to which they belong.
For example, he says personal income tax should be paid to the state government, while signage levies are paid to the local government.
He states that individuals and organisations can conduct a self-assessment to know their compliance level by filling out forms designed for the purpose. He says that the result is expected to be ready after 72 hours.
Demand the best from government
Alli charged the business owners to demand better services from the government as a compensation for tax compliance.
“If you earn an income, you must pay tax because the constitution says so. You must pay, and then hold people in positions of authority accountable for not providing enabling environment. The government uses the tax to regulate the economy and fight corruption. What the government does with the tax should be enquired about by those who are entrusted with the money,” he advises.
Withholding tax is an incentive
Alli stresses, “Whenever a consultant is paid for services rendered, the employer should deduct the withholding tax from the wages and remit the money to the state where the person resides. Deductions of withholding tax also ensure that the person involved remains in the tax net of the agency.”
According to him, the withholding taxes that were deducted at different times for services rendered will serve as credit to the consultant for other tax obligations he or she has.
Value Added Tax, different from WHT
The Tax Controller, Lagos Mainland East, Federal Inland Revenue Services, Mr. M.A. Salami, explains that VAT is paid by consumers of services and is invoice-based.
He says, “When an invoice is raised by a business organisation, five per cent VAT is usually added to the fees for the services rendered. The person consuming the services rendered pays for such a tax. The difference between the two is that WHT is paid by the consultant rendering the service while VAT is paid by the person consuming the service.”
To avoid penalties and sanctions for delayed remittance, Salami advises business owners to keep correct and up-to-date business records, ensure full disclosure and registration for tax purposes and obtain their Taxpayer Identity Number.
Making tax payment easy
On his part, the Intervention Manager, Growth and Employment in States 3, Mr. AdejumobiFashola, said that the NGO was established to assist in creating employment for the poor and women.
He adds that under its Lagos tax harmonisation strengthening programme, the organisation assists businesses to handle tax issues by designing point of payment mechanism and sensitising people to the collectable levies in the state and local governments as well as ensuring compliance.
Fashola explains, “We work on business environment issues through the systemic land- tightening regulation. Using the Geographic Information System, we register lands and assist the poor in acquiring certificates of occupancy so they can have easy access to loans. We advocate the provision of infrastructural development with tax. We believe that complaints should be taken seriously.”
According to him, the major problems SMEs and corporate organisations encounter are the intermediaries or tax collectors who represent the LIRS or FIRS.

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