Business Killing Taxes

Development levy, business premises levy, radio and television license, fumigation license, environment protection levy, just to name a few, are some of the government-led costs of doing business in Nigeria. Tax is the elephant in the market place that we groan about and, as a people, we really need to be ingenious about. We/our administrators need to watch taxes closely as the patients are almost running the asylum and chasing innovation and props to the economy out of town.

Remember the story of the young man that job-hunted for over 3 years until his family put capital together with which he started a small business? Operatives from different ministries, departments and agencies of government (MDAs) swooped in on his shop the same day he launched and he committed to rather die there than have the MDAs fleece him. He really didn’t have a dime to spare anyway so it was either the hard way or the high way with the tax men.

Now, the taxes in consideration include all sorts of levies imposed by MDAs and different groups prior, during and after the commencement of your business. These taxes are usually christened all sorts of names but the end is always internally generated revenue (IGR) and spare change for the boys in the ‘hood.

Your ordeal with these groups is relative to the location or market you find yourself, but the drama starts once you put on the toga of a business in the market place.

Drowon is an Internet services provider. Drowon’s primary source of power is diesel generators, otherwise, its business is kaput because of the nature of public power supply. Drowon has literally adopted the public grid as its backup power source.

Due to the nature and location of its transmission equipment, Drowon is also compelled to employ man guards and smart security services at huge costs. Despite these, its losses per month at most of these locations are phenomenal. The police? Each report of vandalism, theft or loss is an additional cost to the losses already suffered, but Drowon is compelled to go grudgingly through the routine of police reports for insurance purposes.

Drowon has engaged quite a number of local staff, thus it runs quite a reasonable monthly overhead. It is a cross-cultural, multi-ethnic entity, making conscious efforts to be as balanced as possible.

Despite all the shortfalls, drawbacks, business challenges et al, Drowon is still saddled with additional expense responsibilities to MDAs, communities, youth and various gangs at their different locations. The spurious demands for taxes and levies are endless and in various names from countless MDAs and groups. It’s a miracle that Drowon is still in operation when despite all the leakages and lean turnover, its customers still demand competitive lower rates.

Dajim Limited was incorporated a few years ago as an SPV but due to circumstances beyond its control, the purpose for which it was set up is yet to happen. About 4 years down the road Dajim Limited is quietly and calmly slammed with a tax bill of N300M. It is now spending unearned resources to resolve this phantom tax.

The scariest of all these is the fierceness with which the perpetrators of these spurious demands come at their targets. Interestingly, the MDAs in some cases get lower judicial officers to tag along in perpetrating their illegalities and, but for the fight in many entrepreneurs, some are left helpless and hopeless.

This is simply a call for innovation, clarity and streamlining in the tax system such that it is not
burdensome and the taxpayers do not have to fend ordinary public utilities for themselves at humongous rates while being fleeced by different tax masters in the same fiscal period.

According to Nelson Mandela “The more informed you are, the less arrogant and aggressive you are”. This is reflected in most of our tax men but in the negative light. Just hope and pray that they don’t cross your path! But then, as long as you are in the market place, you have your troubles cut out for you with them as they literally come at you barefaced with sickles.

You may be going through these or you’re fortunate enough to have had a one-off experience with the tax men.

Please share that experience or better still, share, with us, some insight into the best way to deal with taxes and their collectors.

1 thought on “Business Killing Taxes”

  1. how not to handle a tax investigation

    Normally, the FIRS assigns special task force from the Tax Audit & Investigation department to investigate and handle back duty investigations, wrong & doubtful returns and suspected violations of the tax laws, in a bid to ensure the correct assessment of taxpayers.

    The question is:

    If you or your clients are singled out for tax investigation, what should you do?


    At that point, not much can be done.

    In fact, the only option available to you is to engage a seasoned tax consultant who understands the dynamics of a tax investigation.

    This you must do before you hand over any records or make any statement to the officials of FIRS. Disclosing stuff at that point may come back to hurt you when the investigation deepens.

    Here’s what happened when the FIRS task force opened up the tax returns of one Mr Chinedu,(CEO) a Lekki based Social Media Strategist who mistakenly thought he could pull a fast one over on the investigators.

    Mr. Chinedu arrived at his office one glorious morning. On his way to the office, he’d received a call from one of his main clients on a big job the client wanted him to help them with. He gave his word and scheduled an appointment for 9:30 am the same day. Chinedu got to the office at exactly 8:00 am.

    As he was making his way through the parking lot, he sighted two men in blue suit, gentle-looking hanging around his office and he thought to himself, “these chaps hadn’t called for an appointment.” Too bad, not a good time to talk, “said Chinedu.”
    He was scheduled for a client meeting at 9:30 am.

    Chinedu alighted from his car, met the gentlemen beside the door of his office, greeted them and they exchanged pleasantries.

    The men asked, “Are you Mr Chinedu?” He replied and said, “yes.” “Any problem?” No sir, they replied.

    They introduced themselves as officials of FIRS and requested to talk with him for few minutes and would like to ask him some questions bothering on his tax returns.
    Chinedu respected and gave them an audience.

    But because Chinedu, a savvy business man who reads far and wide had read an article on a blog on how to handle FIRS officials without the help of a tax consultant present, he saw no harm in agreeing to meet with them for 30 minutes before heading off for his client scheduled meeting.

    The interruption didn’t help, and things soon went sour.

    The FIRS officials’ unrelenting questioning stretched the conversation well beyond one hour, and he had to call his client to cancel his scheduled meeting which was for 9:30am

    What condemned Chinedu was that the two officials spotted more than N4,670,000 in payments from clients that somehow never found their way into the records for receipts that were used to prepare his tax returns, and the inquisitors were unyielding in their unwillingness to accept his explanations for why those payments went unreported.

    Now, there’s something dramatic about the FIRS special task force which we need to know and that is, because they’ve been in this game for a very long time, they understand the psychology and mindset of taxpayers and the way they act when they come under tough scrutiny and questioning, and so, they already have a template on how to disarm the smartest of all business person who’s failing in his/her responsibility with tax compliance.

    At one point, the FIRS special task force noted that Chinedu became extremely nervous and started to sweat, his hands shaking, though, he was in an air-conditioned environment. Infact, he even sought their permission to drink water and go to the toilet.

    After spending close to two hours drilling Chinedu, he realized that the FIRS officials had him dead to rights, and he confessed to not reporting the payments in question.

    He wound up paying all his tax liabilities, interest and penalties and this created a deep hole in his bank account. He was lucky enough not to serve a jail sentence.

    Mark this down: If you or any of your clients is under investigation by the FIRS, my counsel to you is to not speak to them without your Tax Consultant present.

    And if you do not have one now, my counsel to you again is, GET ONE NOW!

    I hope this helps.

    Chidera Anele

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