Nigerians are wondering what the term incremental changes mean in the Finance Bill 2020 being sent to the National Assembly, but Finance Minister, Mrs. Zainab Ahmed, says it does not mean increasing taxes, but an improvement in the tax law, stressing that the country’s value added tax (VAT) remains at 7.5 per cent
The last time a Finance Bill was sent to the National Assembly last year, lawmakers were quick to approve, leading to a 2.5% increase in VAT, but many wonder if the incremental changes being proposed will not mean an inbuilt mechanism for upward review of taxes from time to time
Howver, determined to cushion the socio-economic condition in the country the Federal Government is offering more tax incentives to Nigerians especially through the forthcoming 2020 Finance Bill.
Some highlights of the proposed bill include:
▪︎Reduction in duties on tractors from 35 to 10 per cent
▪︎Reduction in duties on motor vehicles for the transportation of goods from 35 to 10 per cent.
▪︎Reduction of levy on motor vehicles for the transportation of persons (cars) from 35 per cent to 5 per cent.
▪︎Exemption of small companies from payment of education tax under the Tertiary Education Trust fund (TETFUND)-companies with less than N25m turnover are eligible
▪︎50 per cent reduction in minimum tax; from 0.5 per cent to 0.25 per cent for gross turnover for financial years ending between January 1st, 2020 and December 31st, 2021.
▪︎Granting of tax relief to companies that donated to the COVID-19 relief fund under the private sector coalition (CACOVID).
Briefing State House Correspondents after the Federal Executive Council (FEC) meeting in Abuja on Wednesday, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed said, “you recall that we did a Finance Bill in 2019, through these finance bills, what we are seeking to do is to make incremental changes to tax laws relating to customs excise as well as other fiscal laws, to support the implementation of annual budgets.”
“This is further expected to create more job opportunities in the automobile industry and stimulate economic growth,” the minister added.
The inclusion in the Finance Bill intended to grant tax relief to companies that donated to the COVID-19 relief fund is expected to serve as an acknowledgement and encouragement of such behavior.
Some of the principles underpinning the proposed fiscal and other reforms include:
* Make incremental changes to tax, customs, excise, fiscal and other laws to support the 2021 Budget, for instance, by empowering the Federal Inland Revenue Service to automate its collection of tax returns and information from taxpayers within, and trading with the Nigerian Customs Area;
*Providing fiscal relief for corporate taxpayers, for instance by reducing the applicable minimum tax rate for two (2) consecutive fiscal year (from 0.5% to 0.25%), reforming commencement and cessation rules for small businesses, as well as incentivizing mass transit by reviewing the duties and levies regime for the transportation sector, (particularly, targeting tractors, buses, trucks and other motor vehicles);
*Proposing measures and interventions to fund the Government’s COVID-19 Crisis Intervention Initiatives as well as introducing provisions to allow for the recovery of donations made by corporate taxpayers towards the COVID-19 Pandemic and other potential crises;
*Amending aspects of the Fiscal Responsibility Act 2007 to enhance fiscal efficiencies as well as to control the cost-to-revenue ratios of key State and Government-Owned Enterprises; and
*Amending the Public Procurement Act to implement key procurement reforms previously proposed by the National Assembly to extend he Act to the judiciary and legislature, accelerate procurement processes and increase mobilization fee threshold.
The Finance Act 2019, which is the template for the proposed 2020 Bill, sets five strategic objectives, which include: raising government revenue through various fiscal measures, reforming domestic tax laws to align with global best practice, promoting fiscal equity by mitigating instances of regressive taxation, supporting small business entities in line with Ease of Business Reforms and introducing tax incentives for investments in infrastructure and capital market.