Economy & Finance, General

Company Income Tax Hampering Insurance Growth In Nigeria

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Multiple taxation have directly or indirectly affected business growth in , the Company Income Tax Act 2007 is further crippling performance.

The act imposes minimum tax on companies where they have no taxable profits resulting in lower than minimum tax.

The minimum tax applies to insurance companies, which mean that they have to pay taxes out of their capital.

According to Taiwo Oyedele, Partner and Head of Tax and Regulation at PwC , “It is like forcing a man who is suffering from excessive loss of blood to donate some blood. This increases the risk of failure for such companies. If there are issues concerning the genuineness of losses being declared by some companies, it should be addressed as a separate issue through tax audit and transfer pricing rather than paint all companies with the same brush”.

The have undergone many amendments since its inception in 1961, the latest being that of April, 2007, it sets out some rules for the taxation of a company during commencement of business.

But experts say these rules are unnecessarily complicated and result in double taxation of such companies during their start-up phase.

They argued that companies should be made to pay tax only on their actual profits on a preceding year basis right from start to finish (in the event of cessation of business).

Nigeria business operators are currently contending with multiplicity of taxes and there are also multiple agencies that businesses have to deal with outside those required by the constitution.

It also means multiple audits from different agencies that lack coordination and collaboration thereby increasing the cost of doing business and on the part of government, cost of revenue collection is unnecessarily high given that collection structures are duplicated rather than centralised and strengthened.

Similarly the Shareholders of insurance companies under the aegis of Progressive Shareholders Association of Nigeria (PSAN) have condemned the saying that such taxes are detrimental to the sector.

President of PSAN, Mr Boniface Okezie argued that the amended Company Income Tax Act 2007 is punitive to insurance companies, as the provision for unexpired risks (Section14 (8)(9) and provision for other reserves, claims and outgoings, section 14(8)(b) are restricted.

“While we agree that sanity is required, it shall not be at the expense of growth. The reality is growth comes at a risk. The key objective in regulation is to understand these risks and manage them. It also means developing policies to allow insurers to meet the needs of various customer groups,”.



Source: Leadership

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