Freight Forwarders Groan Under Burden of Multiple Taxation

Institute of Chartered Shipbrokers
  • Freight Forwarders Groan Under Burden of Multiple Taxation

Freight forwarders say they are experiencing a tough time dealing with the issue of multiple taxation arising from the cost and freight valuation method currently being adopted by the Ministry of Finance at the ports.

In line with this method, importers are expected to pay import duty rate (ranging from 0 to 35 per cent, with an average duty rate set at 16.96 per cent); automotive levy rate for car imports; five per cent Value Added Tax; seven per cent surcharge; five per cent ECOWAS Trade Liberalisation Scheme, which is 0.5 per cent of Cost Insurance and Freight value; one per cent Comprehensive Import Supervision Scheme inspection fees, which is one per cent of Free On Board price.

The freight forwarders told our correspondent that they were dismayed at the method of calculating these taxes, adding that after calculating, the amount paid for VAT was usually higher than the duty.

Explaining to our correspondent, the President, Shippers Association of Lagos State, Jonathan Nicol, said that in order to arrive at the VAT rate, one had to add the FOB, CIF, duty, one per cent ETL scheme together.

“At the end of it all, VAT is usually higher than the duty itself. We are saying that VAT is supposed to be charged on the FOB only and not on all the items added together,” he said.

Apart from the duty paid to the Customs, importers are equally expected to pay VAT in many areas as the consignment moves from one inspection agency to the other.

“The shipping lines will charge five per cent VAT on the consignment; the terminal operators charge five per cent VAT; and if your product is regulated and has to pass through the Standards Organisation of Nigeria and the National Agency for Food and Drug Administration and Control, you have to pay five per cent to each of these agencies.

“Eventually, one is made to pay 15 per cent VAT in all. The VAT payment is endless,” Nicol said.

The National Coordinator, Save Nigeria Freight Forwarders, Dr. Osita Chukwu, lamented that multiple charges had turned many freight forwarders to paupers.

He blamed the challenges of internal cargo clearance for the reduction in the number of vessels calling on the Nigerian shores.

He said that the Harmonised System codes were obsolete and the CIF was paid in dollars, making business extremely difficult for importers and freight forwarders.

“The way these taxes are calculated in Nigeria is very disproportionate and it is not done that way in any other country apart from Nigeria,” he claimed.

“The important thing is for the Federal Government to cut the duty rate,” The Chairman, International Freight Forwarders Association, PTML Chapter, Mr. Sunny Nnebe, said.

He added, “The duty rate is too high and that is why a lot of people resort to shortcuts to try and bypass it. If the rate is reduced, everybody will be on the same page and all other accompanying taxes will equally come down.”

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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