Shareholders rue effect of multiple taxes on listed companies

•FMCGs, others cut dividend payments to survive

As businesses grapple with rising operational costs and shrinking profit margins, investors have renewed calls to abolish the multiplicity of taxes currently crippling businesses of listed firms, especially the 30 per cent company income tax (CIT) and 10 per cent withholding tax on dividends.

The shareholders, who spoke in separate interviews, stated categorically that the nation’s tax system is depleting returns on investment and eroding the capital base of listed firms, a situation that may subsequently trigger business collapse.

The experts wondered why a greater percentage of the profits made by quoted companies go into the coffers of the government and their agencies in the form of tax payments even when these firms are recording losses.

They argued that although the government has in recent times moved towards a low tax regime, the current tax rates both corporate and personal are still too high to promote compliance and attract investment.

According to them, the 30 per cent CIT, 10 per cent withholding tax, 7.5 per cent of value-added tax (VAT), and 10 per cent capital gains tax not only undermine efforts by capital market regulators to woo more companies to list their shares in the market but also a major factor that triggers delisting of firms from the exchange.

This tax burden is in addition to the myriads of problems, which listed firms are currently grappling with, especially the issue of rising inflation and foreign exchange shortage.

President of the Independent Shareholders Association of Nigeria, Moses Igbrude, said the capital market is currently burdened with the multiplicity of taxes, which constitutes a disincentive to investment.

Igbrude condemned a situation where companies that recorded losses are made to pay taxes from their turnover, noting that many listed firms have resorted to dividend cuts to wriggle out of these financial burdens, which is impacting significantly on shareholders’ return on investment.

He disclosed that out of the 15 FMCGs listed on the NGX consumer index, only seven managed to distribute dividends in the 2023 financial year while prospects for 2024 remained gloomy.

Recall that close to N127 billion capitalisation of four listed firms was pulled out from the stock market within eight months in 2023 while some firms in the oil and gas sector are currently seeking regulatory approval to delist from the nation’s bourse.

He called for a downward review of the withholding tax charged on dividends paid by quoted firms while advocating for longer tax holidays for newly listed firms to enable them to recoup investments made in infrastructures, pay dividends and create more wealth.

Another shareholder, Adebayo Adeleke, said the burden of multiple taxation has continued to shrink listed firms’ profitability, noting that this would trigger massive business collapse if urgent steps are not taken to address the investment obstacles.

“The burden of multiple taxation is increasing the cost of goods and services and killing businesses. It is also contributing to unemployment as businesses cannot reinvest to expand capacity and employ more people,” he stated.

Vice President of Highcap Securities, David Adonri, said the capital market is currently inundated with multiple taxes affecting listed companies, operators and investors.

He pointed out that companies suffer levies from local governments, state and federal government, in addition to unofficial taxes from security personnel at roadblocks.

According to him, these increase their cost of production and distribution, making their final prices internationally uncompetitive. “The myriad of taxes borne by capital market operators and investors make the cost of transactions one of the highest in the world.

“Excessive tax beats down corporate profits and serves as a disincentive to direct and portfolio investments,” he added.