Is there ever a taxation that the big business can never regain from? I was looking at the issue of taxation and how it is always passed down the food/supply chain. This current Presidential era is the era of tax. I went to buy an electronic some days ago and while trying to bargain with the seller he told me he is still selling at last year's price. He added that the recent calls he made gave feedback that the price of goods have increased. This is not due to external economic factors like the dollar strength over naira, but rather, businesses looking for how to offset the current taxations.
25% tax on big businesses accounts is huge. I don't know how this tax will be directed anyway because there is a need to differentiate profit from capital. Another research to make and yes, another pending article. Even if it should be from profit we ALL know big businesses won't be folding their hands to watch something huge get out without a fight.
Ok, I am not saying they will be fighting the tax officials, I am talking about a professional fight here; one that involves ensuring whatever tax is taken, the company must meet its yearly minimum target at least. And how will this be done? Of course the consuming masses you think they’ve been exempted will be leveraged.
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This was the question that came to my mind last week; >Does it mean that the 25% tax can't be leveraged by big business considering the fact that it is drawn out of business accounts annually? This was me trying to understand if this taxation can actually be an unregained tax. It was a good one that I could figure out early that big businesses set their yearly target and if tax is going to take 25% or more then there should be an increments in product prices to cover the tax while still meeting the target. For instance, company A has a target of making $2 million in profit this year and is NOW facing a 25% annual tax. From the current situation it shows they’ve slacked by 500K. So how does this get resolved? They will have to make, let's say, around $2.7 million annually so the 25% tax can still keep them around $2 million. This is where the new product's price increase plays its part.
Nevertheless, one can also see how taxation can seem unregained indirectly. First, this leads to business operation adjustment and secondly a delay in overall growth. Adding to that, if your business does not have stamina, it may soon be heading to bankruptcy. Yes, the market is very competitive; ‘forgone alternative’ is real. A customer can decide to change product brand to TRY out something new at a more affordable price and in the process leading to product consumption shortages.
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At least I can attest to this as a customer somewhere too, cutting costs is not something to joke with especially when the new product is even better than the former. In short even if it should be 80% close to, it remains a big competition at an affordable price. It was about one of my favourite yogourts and I had to switch to something else when I found out that both were still of good quality. I was only buying the former only when the latter got exhausted. Good for them, they later rebalanced at a competitive price and had me back. Don't think it is only me, it was something that showed overall downtrend before such a big brand would make that move.
To conclude, let me add, even heading back to overall growth. In the times when companies face huge taxation, they will have to side for strategy to exist and mostly this leads to focusing on meeting minimum annual revenue rather than thinking of how to hit new records, yes, an indirect loss. Let's see how the entire taxation exercise will play out after 365 days, even the SMEs are watching.
This is an article covered by dani-EL; a broad niche writer. I write on faith, life facts and daily living, business and economics, small scale and daily businessing, cryptocurrency and technology. And yes, I do cover articles on financial education and investment updates. And note, if I happen to be a financial adviser to you, the TOP financial advice should be ‘DYOR’ (Do Your Own Research), I can't afford to break your heart.
