By Nkiruka Nnorom

The Centre for the Promotion of Private Enterprises (CPPE) has 

called for the review of Nigeria’s tax laws, saying that the corporate tax at about 34 percent represents the highest globally. 

The firm noted that the current tax regime stifles investment, saying that an economy that desires job creation, economic inclusion, investment growth and poverty reduction, should have an accommodating tax regime for investors.  

The firm disclosed these in its Economic Review for 2022 and Agenda for 2023 signed by its Director, Mr, Muda Yusuf, arguing that the current tax regime is in conflict with the National Tax Policy which emphasizes incentivising investments through less direct taxation.

CPPE also called for a reduction in the Cash Reserve Ratio (CRR) imposed on deposit money banks, saying that high CRR is not only an impediment to banks’ financial intermediation, but adversely impacts their profitability as there’s no room for credit creation by the banks.

He said: “Corporate tax in Nigeria is 30%. But effective corporate tax is much more than that. There is a tertiary education tax of 2.5% of profit; National Information Technology Development Agency (NITDA) levy of 1% of profit; National Agency for Science and Engineering Infrastructure (NASENI) levy of 0.25% of profit; Police Trust Fund levy of 0.005% of profit.  This brings effective corporate tax to about 34%.  

“This rate is one of the highest in the world. Average corporate tax rate for Africa is 27.6%; Asian average is 19.52%; European Union is 19.74% and global average is 23.37%.  Meanwhile new taxes are still being proposed by the National Assembly. These include Tertiary Health Tax of 1% of profit; and NYSC levy of 1% of profit. There are numerous other taxes imposed on businesses by the states and local governments. 

“This multitude of taxes is crippling investment in the Nigerian economy. There is the need for an urgent review. The current tax regime is in conflict with the National Tax Policy which prescribes that there should be less emphasis on direct taxation in order to incentivise investment.”

On CRR requirements, he said: “The current Cash Reserve Ratio [CRR] of 32.5% and Monetary Policy Rate [MPR] of 16.5% imposed on the Nigerian banks are among the highest globally. High CRR in particular has become a key impediment to financial intermediation by the banks. Even more disturbing is the fact that effective CRR is as high as 50% or more for some banks.

“Financial intermediation is a fundamental function and essence of the banking system in an economy. The high CRR has made it difficult for the banks to play their primary role of financial intermediation.  “Their profitability is also adversely impacted because of limited room for credit creation activities. 

“Ways and Means finances of the apex bank pose greater liquidity and inflation risk to the economy than bank deposits. “We seek a reduction in CRR so that the banks can be better placed to play their primary role of financial intermediation in the economy.”