Challenges of running a business in high-tax countries

A lot of countries aren't friendly to businesses due to the hefty taxes they impose on entrepreneurs. In many African nations, there's this vibe of extortion and illegal tax demands, especially hurting small and large businesses alike. Take Nigeria, for instance, where many potential business owners are hesitant to dive in because of harsh government tax policies and bills. It’s tough out here, and many businesses struggle to last because of constant threats and tax hikes from the government. From what I've seen, these are some of the main challenges leading to business failures: difficulty in keeping the business afloat, capital shortages, competitive pricing issues, low staff salaries and benefits, and even forced liquidation or moving to less commercial areas. In certain parts of the world, running a business feels like you need rock-solid insurance and a strong partnership with the government just to survive.

It's all depends on our business and the modes of operation we are adopting to engage the business, if it is a location base Enterprise we are doing, then we may not be able to afford evading their regulations because they will definitely look after us and demanded to be regulated under their authorities, but when we operate online, you still have the advantage of running a decentralized currency for our transactions and this may not really be a reason to subscribe to their policy for regulation because we are not using Fiat.

High taxes can certainly discourage investment but I don’t think taxation alone is the problem here. Many businesses are willing to pay reasonable taxes when the rules are clear, predictable and applied fairly. The bigger challenge in many developing countries is the combination of multiple taxes, regulatory uncertainty and weak access to financing. When business owners are constantly dealing with power shortages, inconsistent policies and numerous levies from different government agencies, growth becomes very difficult. Government should view businesses as partners in economic development not merely as a source of revenue because the easier it is for legitimate businesses to operate and expand, the more jobs are created and the larger the tax become in the long run.

Not once do you actually state what you consider to be an acceptable tax rate or do you just think that no businesses should pay any tax at all, allowing the rich to get even richer? Do you think the tax rate should be 20% on small businesses and 30% on "large" businesses, or what? Taxes can allow a government to improve services for all and pay for things like healthcare, police, firefighters, (hopefully independent) judges alongside infrastructure like the road networks. Africa definitely does face a problem of a broken mindset because it appears that even if politicians start off with honest intentions then they often get corrupted at some point along the way and if they don't it is very easy to get them replaced for very little cost. The West used to prey and abuse them, still do to some extent but it's now also under assault from places like Russia and China competing - through various different methods - to get a grip on power on this resource heavy continent.

Not every business requires the collaboration from the government and till it becomes extremely neccesary to work with the government, it's better to carry out your business while isolating any form of government interference. Government will milk your business through taxations while failing in Thier part to provide the basic things that aids the functionality of the business. Most companies and even small scale businesses prefer to operate in a manner that doesn't directly brings government eyes on them. That way, they channel Thier energy into the internal mechanics that affects the growth of the business.

As a CEO you should first of all study your business environment, if you are doing a legal business, I don't see how all this you mentioned affects your business. You as a business should have a system in place that make you escape all the unforseen challenges that comes from the business. Alot of people go into business without proper preparation, they just move on with business Because they have the capital to do so, not experience on business itself.

That's why social media exists. In Nigeria, people have devised means of selling online due to the high cost of renting a physical shop and the high tax imposed on them. In addition, the challenge is more because local community members also come to take their own levy from shop owners. I dont know if this particular community tax occurs in other parts of the world. I would love to know. However, the problem of taxes is serious in most African countries, with no possible solution to it except for social media.

You could form a LTD, LLC and work from there. The LTD is your way out.   In the digital world Information is still freely available. Taxes and regulations are the only income some municipal organizations know. So they send out their clerks to collect.

Without factual backup link to your claims your position is just an allegation. All tax systems does not completely favour every one that it affects and critiquing it is accepted. What has mostly discouraged entrepreneurship uprising in the third world nations like that if Nigeria you made an example of is not the issue of taxation but that the government are failing in their responsibility to create an environment that is with the conditions to make businesses grow. I'm talking about constant electricity, political stability, security, investors both foreign and domestic are willing to invest into an economy that is secured and stable system etc etc. Taxations alone is not enough to chase out or discourage investors to build business in a country but the former factors I mentioned are critically able to so fastly.

Before you come to make claims online, please ensure you've done your due diligence Source Under the new tax reform, small companies are exempted fully from every company tax, thereby encouraging them to thrive and survive in the country.

Nigeria is one of the countries in the world you could easily start any kind of business you want hence you have the capital, The ecosystem is friendly to business owners, this is because they mostly have the prerogative to control their enterprise without much government undue interference, in rural areas and even some urban towns, there is little tax to which some micro and medium enterprises pay, sometimes the government even ignore some of those businesses and targets the giant companies. As we speak, I know that there are some tax that has been added to the constitution, but if you go round and ask some of this business owners that deal on small scale medium enterprise,  they hardly pay these tax, except for few times that you see some local government tax guys that will come and start harassing them for tax Livy. and the staff salaries for some of the employees in some of the businesses or companies are always negotiable with the staff, so for me I believe the business environment in Nigeria is flexible. The only way the Nigerian government can easily collect tax from literally all the businesses, is if they digitalize the system for everybody which for now is looking as if it's impossible.

That is certain, if there is a country that has a negative tax system, if a business does not calculate income, of course that business will have to bear high costs. What's more, with conditions like today, the potential for inflation coupled with negative tax policies will certainly make it difficult for the business to operate. We often see businesses looking for other sources of income, when company finances are burdened due to high tax rates, it is not surprising that we often see layoffs when the economy slows down due to negative taxes.

Well, to my knowledge, it's still easier to start start a small or large scale business in Nigeria than in some other part of Africa, although it depend on the state you are living in Nigeria, what I can say is a major issues for some businesses in Nigeria is insecurity, the high level of insecurity made some business to short down while some are still struggling, but the line of business you are doing also matters, in some state, the tax is not really a problem, it depends tho.

One thing I always like about the Middle East is that they are business-oriented when it comes to creating opportunities for people and making avenues available for everyone to showcase their talent and discover new paths to financial success in the economy. Sometimes it is not about taxing people in such a way that could lead to an abnormal experience, people are not supposed to be the first to do what is right, when you create a conducive environment for them to do the right thing, they will not hesitate to do it. Today, we see various opportunities including the one we have in cryptocurrency not being supported by some of our countries in Africa and Asia, which is one of the fastest-growing continents when it comes to crypto opportunities and the like, not to talk of you going to the Middle East where they created an environment for all this and made fair regulations for the people to engage in various economic sectors.

I was doing some research on some of these big countries and how many of them rebuild themselves or got started and there were some level of similarities between the amongst themselves. Many of this big nations did not become big overnight there were times that was very economically terrible for them, take for example Germany after the war and losing lots of manpower and their situation wasn't looking fair they needed to do something to salvage their situation. Germany made bold step signing pact with turkey to allow people to come into the country and work, you can imagine that they won't be strict on these expatriate to encourage more people to come. Many big nations at one point had a system that supports nation building and provided workers an economically conducive environment but now that's not the case anymore. Right now nations that wants to be big are giving people that opportunity for example Dubai.

The truth is that it depends on the type of business you do that will determine the level of tax you pay. High income earners pay higher tax and low income earners pay low, and small scale business that fall under the category of workers earning minimum wages are even exempted from paying tax because their annual minimum wages are between #800k to #1.2m. so in conclusion not all business that pay tax. I have seen many local business men and women who do their business on daily basis but do not pay tax. They may pay in some other ways but not with the business they do. And even if they pay, it is very little and has no capacity to break down their Business. Business collapse due to economic inflation and lack of managerial skill and not because of tax. If tax was only the problem, many business would have survived but the rate of economic inflation is what is killing business, making people shut down their shops.

I think that small startups or online businesses do not need so many regulations. At least in our country Bangladesh, we often see thousands of entrepreneurs doing good business by just opening a Facebook page, In the beginning, they do not have to go through much paperwork or complicated processes, so beginners easily get the courage to take the initiative.  However when the business starts to grow, creates its own brand or plans to open an offline showroom or outlet, then of course licenses, taxes and other legal issues become important. I think that the easier the start the more people will try to become entrepreneurs, and when the business grows, the best way is to gradually follow the necessary rules.

I don't think you really understand what you're saying. Nigeria is a place where you can even start business without registering your company and only get to properly register it with CAC when you must've had enough money to do so. Small companies doesn't pay any tax currently in the country in the new tax reform policy and it's very easy to start a business here in the country of which people even convert one or more rooms in their house to a shop and start selling to their neighbors and enjoying 100% profit. I don't think Nigeria is a good reference to your argument. You're very wrong on this one. You are free to prove me wrong

I don't think businesses experience taxes alone as a challenge, businesses also face things like unstable electricity, insecurity, poor or bad roads, difficulty when it comes to accessing affordable loans and lastly multiple regulations, all these things also increase the cost of doing business. When all these problems happens at the same thing, you will see alot of businesses struggling no matter how good their service and product is. Besides that, the government also needs tax revenue to provide public service, but the system too should be fair and transparent. Because if businesses see that the taxes are reasonable and properly used to create a better business surroundings and improve infrastructure, huge number of people will have the confidence to expand their business, employ more workers and invest. With this kind of partnership government and businesses can benefit everyone over time

Tax is not a big problem in the case of business organizations, you may not deduct the tax from your own pocket, but rather you will deduct the money from the pockets of your customers. Tax is basically added to the product which the customers pay for. Since the tax policy is imposed on every business in the country, every business does the same thing. The problem arises when there are irregularities in the tax policy and taxes are imposed without any balance. Even if the government provides benefits by balancing the tax, then tax is not a problem. The big problem is corruption and the money paid by the businessmen (tax) is stolen or laundered.