Partner and Chief Economist at PwC Nigeria, Andrew Nevin has said the current multiple tax regime will stifle the entire economy and constrain MSMEs from growing, as it is quite difficult to grow in an economy that is not growing.
In a series of tweet on his handle, Nervin said: “The complexity and cost of governance and the fiscal crisis is leading to a situation where successful companies in the tax net are subject to more and more taxes, which means they cannot grow and some companies in the formal economy will try to move back to the informal economy, further compounding the issue.”
Recall that 2020 started with the announcement of the increased VAT rates. Barely weeks after the easing of the lockdown, Nigerians were greeted with the increase in fuel price.
“If the cost and complexity of entering the formal sector is too high, then the SME will elect to stay in the informal sector with all the attendant issues, including that they can be subject to harassment by the authorities,” he said.
He noted that the large SME sector arises partly from unemployment and people rushing into entrepreneurship as a means of livelihood; as well as the difficulties to grow a large and strong business.
Nervin said: “The best structure for the economy is to have strong large companies that then create room for SMEs to be part of their ecosystem.
“Large companies raise standards (look at quality of Dangote companies for example) and raise productivity and create opportunities for others so the large SME sector is a sign that business is too difficult because if Nigeria was functioning correctly, we would have 100+ Dangotes in the Economy,” Nevin added.
