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Why President Tinubu’s plans to harmonize taxes should start with the capital market

  • Market operators highlight the importance of harmonizing multiple taxations in the capital market and economy to boost earnings of public companies and attract investors.
  • The new President of Nigeria, Bola Ahmed Tinubu, pledges to address complaints of local and foreign investors regarding multiple taxation and anti-investment barriers.
  • Operators emphasize that excessive tax burdens discourage both local and foreign investors from participating in the capital market, calling for harmonization of taxes to create an attractive investment environment.

Some market operators have said that harmonisation of multiple taxations in the capital market and the economy will help improve public companies’ earnings and attract foreign and local investors in the nation’s local bourse. 

The operators stated this in a chat with TheTimes while reacting to some of President Bola Ahmed Tinubu’s economic plans for Nigeria.

Recall that the President had stated during his inauguration speech that his government would review all the complaints of local and foreign investors about multiple taxations and various anti-investment inhibitions. 

Market Operators’ Reaction

The operators noted that various taxations that are levied on shareholders and quoted companies were reducing the earnings of both quoted companies and investors hence discouraging them from investment. 

Mr Mike Eze, Managing Director of Crane Securities Limited, said there is an urgent need to harmonise all taxes in the capital market. He said:

  • “A shareholder pays annual income tax as a citizen and as a shareholder in a company, the company pays him a dividend, and by law, he is required to pay 10% VAT on the dividend he earned from the company.  
  • “There is also a capital gain tax on the profit made from the sale of shares. Outside of that, if he is running a business, there are various taxes he will be required to pay to local government and State.” 

Why they want it Removed: Multiple Taxation Discourages Local and Foreign Investors

He further noted that both foreign and local investors are not being encouraged to take an investment decision due to the multiple taxations they face in the capital market and the country. 

  • “There is a need to harmonise the tax system because the multiplicity of taxes is taking a toll on shareholders. It is scaring people away from investing in the nation’s capital market. Both local and foreign investors need to be encouraged by harmonizing the taxes.  
  • “There is a need for the government to take a closer look at the issue of multiple taxation so that investors will be encouraged, particularly foreign investors because they are most sensitive.  
  • “With foreign investment inflow in our country, our foreign reserve will be enhanced, and it will have a ripple effect on the economy, the business will boom, and it will reflect other sectors of the economy and improve infrastructure,” he said.  

It Affects the Economy Negatively

Former President of the Chartered Institute of Brokers (CIS) and the Managing Director of Arthur Steven Asset Management Limited, Mr Olatunde Amolegbe, told TheTimes that multiple taxations impact negatively on the economy of any nation adding that when a country does not have harmonized taxation regime, it makes the economy of such country uncompetitive because investors want to be certain of their tax liability before they take an investment decision. 

  • “Environments, where tax liabilities are high, are likely to attract less investment than those environments in which liabilities are lower. An environment where total liabilities are not clear stands the risk of attracting even lower investors.  
  • “If as a country your total tax liability is considered higher, you are likely to attract less investment vis-à-visa country where their tax liability is considered to be lower. But, however, a country where the true liability cannot be established due to multiple taxations are likely to suffer lower investment. That’s how multiple taxations impact investment in an economy generally,” Amolegbe. 

How Nigerian Investors Suffer from Multiple Taxations

Amolegbe noted that investors in the capital market tend to suffer multiple taxations in many ways: 

  • “For example, the Federal Government levies corporate income tax on the profits of companies, yet the same government also levies additional withholding tax on dividends paid out by these companies from their income. 
  • “They have already taken corporate income tax from the profit, and they will go ahead to take a 10% withholding tax on dividends declared from the balance of that same profit from which they have taken corporate income tax.  
  • “This kind of multiple taxation has the propensity to discourage both local and foreign investors from wanting to participate e3sate in the capital market.  
  • “Secondly, the Federal Government introduce a capital gain tax on the shares, all of these taxations could discourage investors from taking the position in the capital market and that’s why it is necessary to harmonize the multiple taxations in the economy”.  

Harmornising Multiple Taxation Will Encourage Investment in Nigeria’s Capital Market

Mr. Andrew Tsaku, a Securities Dealer said that harmonizing multiple taxations in the country will encourage more investment in the capital market adding that investors always look for the net effect of investment tax. 

  • “Government should not make taxes a complicated issue in the capital market. Dividends currently enjoy a 10% tax. Capital gain tax on whatever profit you made on the sale of shares which the Federal Government had removed to encourage people to invest in the capital market has also been brought back in a country where not more than 5 million people participate in the market. 
  • The government should also not make taxes exorbitant, the size of taxation can be reduced, for instance, withholding tax could be reduced to 5%. The objective will be to make more investors dispose of the market. If the government wants investment, it should make it more attractive. 
  • Investment always goes to where there is an enabling environment. Across the globe what investors look at is the effective yield on investment. Investors would like to assess the level of tax across assets and geography before taking an investment decision,” he said.  

Tajudeen Olayinka, the Chief Executive Officer of Wyoming Capital, and Partners: 

  • “Multiple taxations raise tax expense for every business concern, reducing earnings per share for public companies and discouraging further investment. Therefore, harmonisation will help improve public companies’ earnings and earnings prospects, going forward”. 


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