Manufacturers Association of Nigeria (MAN) and the Nigeria Association of Chambers of Commerce Industry Mines and Agriculture (NACCIMA), have vowed to resist the passage of a legislation in the House of Representatives that aims at compelling companies in Nigeria to pay 1% of gross profits to fund projects under Corporate Social Responsibility (CSR).
The bill, which is going for second reading, and seeks to compel all indigenous and foreign companies to set aside 1 percent of their annual gross profit for implementation of CSR projects. The groups said they see as a step by the federal Government to further overburden the companies.
Sponsored by Sunday Karimi, the bill also seeks to ensure that companies operating across Nigeria are not only accountable to their shareholders, employees and trade unions but also to the consumers, host communities and wider environment.
Under the arrangement, the bill gives additional power to the Corporate Affairs Commission (CAC) – primarily responsible for registering of companies and various entities in Nigeria, to ensure compliance.
Some of the CSR projects listed in the bill include: eradication of extreme poverty and hunger; promotion of educational activities; gender equality; empowering women, establishment of centre for aged and catering for the aged in the society; reducing child mortality and maternal health; combating malaria, cancer, Acquired Immunodeficiency Syndrome (AIDS) ad other related diseases, ensuring environmental sustainability, development of vocational enhancing skills, among others.
The sponsor of the bill proposed the inclusion of new clause in Section 38a for the establishment of Corporate Social Responsibility Department in the Commission.
Part of the functions of the department include: ensure and enforce that all incorporated companies under Part A of the Principal Act, initiate, implement and enforce corporate social responsibility to its stakeholders especially the consumers and host communities.
“Ensure in cooperation with Federal Government Agencies, that Government at all levels, especially Federal Government fulfills its obligations of providing enabling environment for businesses and incorporated companies.
“Ensure that incorporated companies give back to their stakeholders ad host communities; ensure that before incorporation, all incorporated companies have a commitment to corporate social responsibility in the object clause of the incorporated company and develop a corporate social responsibility framework that fosters national development without being distinctive to investments in Nigeria.”
Section 38(e) of the bill, also provides incentive of 2% company income tax relief for companies which embark on CSR in the succeeding financial year.
Section 386(d) of the bill, empowers the CAC to shut down and suspend the operations of any organisation, corporation or company for a minimum of 30 working days as penalty for non-compliance with the provisions of the Act.
However, the President of MAN, Frank Jacobs, told BusinessDay that over 37 million small and medium enterprises (SMEs) operating in Nigeria with a contribution of 48% to the Gross Domestic Product (GDP) would be threatened if the bill eventually becomes a Law.
Apart from the threat to the growth of the SMEs, the members of the Organized Private Sector, said compelling them to pay 1% of their annual gross profit which is huge is already burdensome, as they are already battling with all manner of taxes that they are already paying to the government.
“We already have the Education Tax that goes to the Tertiary Education Trust Fund and other agencies,we also contribute a certain percentage to the Industrial Training fund,with all other manner of multiple taxation we are battling in the country. We are not obligatory to pay for corporate Social Responsibility,and to state the least most of our members are doing it,why then now compel us with this legislation”
Jacobs also informed that the 1 percent CSR is huge stating that the Organization will resist the bill during Public hearing section of its consideration, as the bill is currently at the stage of second reading.
“This is another indirect tax,and we are going to kick against it as we are already over burdened”he adds further.
Tony Ejinkonye, the Vice President of NACCIMA in the same vein told BusinessDay that the 1 percent is already overburdening the members of the organised private sector, as they are paying all manner of taxes already.
Ejinkonye pointed out that the implication of the 1% CSR annual gross profit is equivalent of 30% profit because turnover will be removed from purchases without factoring other costs into it.
“It counters the ease of doing business which the present Administration has been priding on.The Legislature and the Executive seem to be working on discordant tune,and it is not healthy for our economy”Ejinkonye said further.
Industry watchers say the federal Government must find a way to encourage industries operating in the company through good trade policies rather than burdening them with all manner of taxations which could lead to job loss and distress on the overall economy.
