FG SHOULD SCRAP CAPITAL GAIN TAX, REDUCE INCOME TAX
By MICHAEL EBOH
The Federal Government has been called upon to scrap the capital gains tax and reduce company income tax applicable to the productive sector of the economy.
In an address titled, 'Consistent Government Fiscal Policy: A Key to Sound Industrial Development' delivered at the Mid-Year Meeting/Dinner of the Pharmaceutical Society of Nigeria, PSN Board of Fellows in Lagos, Group Managing Director/Chief Executive Officer, UAC Nigeria Plc, Mr. Larry Ettah, urged the government to immediately streamline the various taxes in line with the reality of the cost burden imposed on companies by the absence of critical infrastructure facilities.
'Government should reduce company income taxes applicable to the productive economy and scrap capital gains tax. We also hope that all governments will find the political will to actually streamline taxes, charges and rates nationwide as provided by Act 21 of 1998 and improve collection efficiency generally, rather than concentrate tax raising efforts on a few socially responsible individuals and companies,' Ettah said.
He listed factors affecting businesses in the country to include tax structure, particularly company tax, Personal Income Tax, unbridled approval of waivers and concessions to groups and individuals to import products at concessionary duty rates.
Other factors, he said, are non-inclusion of overhead costs of manufacturing companies in the calculation of input-output VAT, re-introduction of Customs Duty on importation of plants and equipment, which makes retooling and expansion more expensive; absence of incentives for providing own-infrastructure and utilities by manufacturers and the implementation of minimum tax which is inimical to the survival of ailing industries.
According to him, Nigeria's current tariff structure does not pay sufficient attention to the reality that the productive sector in Nigeria suffers a cost disadvantage relative to other economies that may be as high as 40 per cent due to power, infrastructure, logistics, corruption and other operating costs.
He said, 'Consistency of fiscal policy whether relating to taxation, budgets and spending, tariffs and industrial incentives, economic diversification and other elements of government policy are sine qua non for successful industrial development. That way, businesses - local and foreign - can take investment and strategic decisions knowing (rather than praying) that they will stay at least into the medium and long term.'
Ettah called on the government to ensure that it rationalise the cost of regulatory compliance and the conflicts and overlaps between regulatory institutions.
He pointed out that the major weakness of fiscal policy in the country was the skewed structure of the budget balance in favour of recurrent expenditure, which tended to average 75 per cent of budgeted expenditure, leaving only approximately 25 per cent for capital expenditure.
'The effect of this arrangement has been severe under-investment in infrastructure - schools, roads, rail lines, bridges, power installations etc, while salaries and overheads and running costs of government ministries, departments and agencies consume the bulk of public spending. This unwise structure now accounts for the sapping infrastructure deficit that now plagues the nation,' he noted.