Let me quickly congratulate you if you benefitted from the Business Incentive Strategy (BIS) by the Corporate Affairs Commission (CAC) where you paid a token of N5, 000 to register your business. Congratulations! However, I won’t fail to avail you of the implications attached to this supposed “generous” government intervention. This way, you may prepare your mind for future eventualities.
Yes, with a duly registered business name you can open an account with a commercial bank, apply for loans, secure grants, and benefit from a long list of other opportunities. Congrats, once again.
In business, baiting is a marketing strategy which is a savvy tactic used to convert (achieve business goals) without appearing “exactly” intentional. It entails playing on the psyche and emotions, tempting or appealing to pity of an addressable target audience. Bloggers do this to direct traffic to their sites –in what is call click baiting.
Analysing the CAC offer of reducing registration cost to N5, 000; the government, through the business regulatory body, successfully practiced baiting by incentive. And, this time, you are the fish in the net.
The old reality
Before now, the federal government has not succeeded in aggregating a close-to-correct number of businesses operating within the shore of the country. Anywhere in the world – I must note categorically – Micro, Small and Medium Enterprises (MSMEs) make the larger percentage of owned businesses by residents and citizens alike. On the flipside, enterprises existing in the large category only make a mere fraction.
Appraising the stats
Published business survey statistics (from the multinational services network PwC) reveals that SMEs – in Nigeria – account for 96% of owned businesses which facilitate over 80% of the country’s employment and contribute a 48%share of the nation’s GDP. This is unsurprising as it’s the usual trend. In South Africa, for example, SMEs contribute 52% of total GDP while accounting for 91% of businesses and taking care of nothing less than 60% of employment.
What does this imply?
A careful examination of figures in the above Nigeria-South Africa put to the fore the potential locked in the ambit of MSMEs of any given country. With the CAC registration, the government is armed with a better value statistics of businesses running within its mapped territory.
Why the need for this record?
The current government led by president Buhari is, perhaps, the smartest we have seen. From the idea of operating a single treasury account to various Forex restrictions, we have observed a significant paradigm shift from the old ways in terms of operations. What we are not certain about, however, is if this departure from the old ways will lead us up the hill.
Signing up as many as possible businesses for a stipend is a good way to closely monitor their activities –especially in ensuring they fulfill their obligations (such as annual tax remittance) to the government.
How possible is this?
Recall that in the process of the registration, applicants submit details sufficient to smoke them out in the event that they want to play hide and seek along the line. Some who do not have an office address went on to supply their permanent home address. Literally, there is no hiding place for their golden fish. The best any registered business owner can do is to learn about how to fulfill responsibilities that come with owning a business to avoid possible prosecution by law.
- 1st of October to 31st December, 2018 –FIRST PHASE
- 1st of January to 31st of March, 2019 –SECOND PHASE
- 13th of May to 13th of August, 2019 –THIRD PHASE
- … to …? –FOURTH PHASE
Result from the epic registration stunt
Going by the figure published by the commission, it suffices to commend the initiative. In 2018, Nigeria recorded over 200, 000 registration.
- 175, 000 in 2016
- 193, 194 in 2017
- 252, 035 in 2018
Till date: 3.1 million registered company –SOURCE: CAC
What you cannot escape
The current dispensation has demonstrated high sense of lordship over economic matters. It may soon predictably come after tax invaders. In a bid to service debts and boost the economy, the N5, 000 bait stunt might just be another window to boost revenue. This incentive from the federal government is what I term Tactical Backward Integration (TBI) where the government systematically integrated vertically to expand it fortune base.
What tax should you prepare for?
In Nigeria, we have quite a long list of tax to service. From the basic Company Income Tax (CIT) to Stamp Duty Tax (SDT), and from Education Tax (ET) to Capital Gains Tax (CGT), the list goes on. Some go to the federal government through the Federal Inland Revenue Service (FIRS) while some are remitted into the state or local government purse.
CIT, for instance, is the tax paid off from profit made by incorporated entities while SDT has to do with tax paid on documents binding people together in form of agreement paper or binding an individual and a company like contract documents.
In a way to support education in the country, businesses are obliged to remit a percentage into the purse of Education Trust Fund (ETF). This way, the body can commission more projects in line with its mandates. CGT only comes to play when a company sells an asset and makes profit. The company shall be due to pay CGT which is only 10% of profit made in the trade.
Others to look out for, as far as Nigeria is concerned, include:
- Personal Income Tax
- Pay As You Earn (PAYE)
- Value Added Tax
- Withholding tax
- Consumption tax on hotel and restaurant patronage if you run any
Tips to prevent high tax levy
Should you open a business account upon your registration, avoid (at all cost) mixing up your personal finance with your business capital, expenditure and revenue. Doing this serves to your disadvantage as you will be audited against your bank statements, when tax officers surface. Also, don’t prove smart by dividing your revenue through account diversity. Remember you have a single Bank Verification Number (BVN), you can be audited to the latter.
To draw the curtain
Ideally, any well-meaning citizen should not evade tax. But, in a country where government hasn’t shown enough accountability, there is an inherent fear of what becomes of tax paid at various levels –will it be channeled appropriately, duly accounted for upon audit request, or noticed through accelerated development of infrastructures?
Away from this unsurprising customary fear, however, registered business owners should endeavour to get acquainted with what is required of them by law, to play it safe.
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