VAT, multiple taxations undermine stock market performance

Barely two years after the resumption of Value Added Tax (VAT) to the stock market, investors have returned about N30 billion into government coffers. The amount includes the 10 per cent withholding taxes remitted to the government, despite market operators groaning under the weight of double taxation.

The Federal Government, had in 2014, granted a tax holiday on all stock market transactions, a deliberate action to reduce the high cost of transactions in the market and make it more attractive to investors.

However, at the expiration of the tax exemption on July 24, 2019, dealing members were mandated to charge VAT on all commissions applicable to capital market transactions with effect from July 25, 2019.

Besides VAT and 10 per cent withholding tax on dividends, there is also a 30 per cent company income tax (CIT) charged in addition to other regulatory charges, which operators described as high and discouraging to investors.

The situation is not helped by the high-interest rate environment in Nigeria with Monetary Policy Rate (MPR) at 11.5 per cent, which is comparatively high when compared to the single-digit interest rate obtainable in South Africa and other African countries.

Against this backdrop, stakeholders have urged the Federal Government to abolish the withholding tax and VAT from the market to enable it to contribute meaningfully to capital formation.