Expert argues against customs, revenue-collecting, retaining huge percentage

A policy and legal expert, Clement Nwankwo, has argued that the Nigeria Customs Service (NCS) and other revenue-collecting agencies of government should not be allowed to retain any percentage of the taxes collected on behalf of the government aside from their annual budgetary allocations.

In November 2024, Customs said it collected N5.7trn in annual revenue, with a month left in the fiscal year as of the time of the announcement.

Clement Nwankwo, a legal and policy expert, has maintained that, other than their yearly budgetary allotments, the Nigeria Customs Service (NCS) and other government revenue-collecting organizations should not be permitted to keep any portion of the taxes they collect on behalf of the government.

According to Nwankwo, the Executive Director of the Policy and Legal Advocacy Centre, accountability must be maintained on all fronts for taxation in Nigeria to be successful.

He was a guest on a socio-political program aired on television.

With a month remaining in the fiscal year, Customs reported in November 2024 that it had earned N5.7 trillion in revenue annually.

To boost the amount of money that can be collected by governments at all levels, Nwankwo stated that significant changes must be made to the tax structure.

He said, “Taxation has been handed over to companies and consultants; companies with dubious ownership between themselves and public officials are the ones collecting taxes for the government. So, the way that these companies operate is such that it doesn’t matter to them the fairness of the taxation.

“If you come to Abuja, for instance, you could have a fee slapped on you for something by a consultant and his tax-collecting company, who is going to get a cut. So, their measure of success is how much they can extract. So, a lot of times, the level of taxation is exceedingly high. Whatever they collect, they get their shares.

“The same thing for government agencies. I have no understanding why agencies should be allowed to retain a huge percentage of revenue collected. For instance, if you go to Customs, Customs is allowed to retain some percentage. That has to change to see this country move forward.

“What you see this agency do is to collect these taxes. You can imagine collecting taxes running into trillions of Naira and being asked as an agency to retain even 1% of that. There is a lot that needs to change within the taxation system that can help to increase collectable revenue for governments at all levels.”

The expert also faulted some provisions of the proposed controversial tax bills introduced by President Bola Tinubu in the National Assembly. According to him, companies in Nigeria have been burdened with multiple taxation, which has made operating in the country a herculean task.

He said multiple official taxation, coupled with the high cost of operations, arbitrary bills, informal taxes, and the high cost of setting up physical infrastructure, have made the operating environment very harsh for businesses to survive; hence they are forced to exit Nigeria.

Nwankwo said, “Nigerian businesses are the most taxed; multiple taxations. You saw the report from the Oyedele committee: more than 20 taxes. And the taxes are coming from local governments, the federal government, toll gates, everywhere.

“The constitution specifically prohibits double taxation. In Nigeria, it’s more than double taxation. You take money, you move money to somebody else’s account, and you are taxed for taking the money out of your account. Then the person who receives the money is taxed on the same money. There is just too much taxation. You have taxation by different phone companies. All of these taxes are just incredibly too much. So, businesses are folding up.

“If you look at the tax reform bill, it is proposing to tax companies on their profits: a development levy and 4% of their profits. Now, these companies are already paying taxation on their profits: company income tax. So, is this a new tax that the reform bill is proposing, or what is it really that it is saying?

“And there are still other taxes on companies: there is the 1% education tax and all sorts of taxes on companies. A company does not set up its business to share its profit with the government. It has an obligation to pay its tax, but beyond that, why is it that every time there is an establishment bill in the National Assembly, they immediately tax companies?

“That’s what companies are complaining about. That’s why a lot of businesses are shutting down. That’s why a lot of businesses are going offshore, trying to go into other countries to operate.”

As Nigeria battles its current economic crisis sparked by the Bola Tinubu government’s twin policies of petrol subsidy removal and unification of forex windows, some manufacturing companies have exited the country in the last year.

Some of them are Kimberly-Clark, makers of Huggies and Kotex brands of diapers; US-based Procter and Gamble (P&G); GlaxoSmithKline (GSK); Unilever Nigeria Plc; Sanofi-Aventis Nigeria; Bolt Food & Jumia Food Nigeria; amongst others.

Some similar reasons given by the companies include high energy costs and currency depreciation.

In his speech on the occasion of Nigeria’s 64th Independence Day Anniversary on October 1, 2024. Tinubu said his “administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes.”