With the Finance Bill currently being debated at the National Assembly, Nigeria’s federal government hopes to rev up revenues by removing tax exemption granted for dividends or income received from companies charged under Petroleum Profits Tax Act.
This is one of several new fiscal initiatives that the government intends to drive using the finance bill 2019, which last Wednesday passed the second reading at the Senate, having been sent by President Buhari to a Joint Session of the National Assembly in October.
The objectives of the Bill, as outlined by the President include; to promote fiscal equity, reform domestic tax laws, introduce tax incentives for investments in infrastructure and capital markets, support small businesses; as well as raise revenues for the Government.
Minister of Finance, Budget and National Planning, Zainab ShamsunaAhmed, said on Tuesday that the speed and commitment with which the National Assembly has considered that bill was commendable, particularly at a time when the government is under immense pressure to raise revenues and fund budget.
Ahmed said recently that going forward, the annual budgets will be accompanied by finance bills to enable the realization of revenue projections.
“Future finance bills will therefore also provide us with additional opportunities to incrementally improve the fiscal policy and regulatory/legal environment in order to further strengthen our domestic capital market, and ultimately ensure sustained and inclusive growth and development,” she stated further.
According to her, the initiative, which most Nigerians say is laudable, with the proposed modifications to the fiscal rules around taxation is clearly aimed at creating an enabling business environment and alleviating the tax burden for small and medium enterprises,” she noted.
According to her, the bill is to, among other things, amend some tax provisions and make them more responsive to the tax reform policies of the Federal Government and enhance its implementation and effectiveness.
The tax laws include; the “Companies Income Tax Act, Cap. C2, Laws of the Federation of Nigeria, 2004 (as amended to date) which seeks to amend the provision of the Companies Income Tax Act to, amongst other things, curb Base Erosion and Profit Shifting (BEPS) as proposed by the Organisation for Economic Cooperation and Development (OECD) and thereby broaden the triggers for domestic taxation of income earned by non-resident companies in Nigeria through dependent agents and via online market platforms.
The Bill also seeks to address the taxation of industries, such as insurance, start-ups, and the capital markets, evaluated by the Federal Government as critical to the growth and development of the Nigerian economy with a view to stimulating activities in those sectors and fostering overall economic growth.
It also seeks to amend the Value Added Tax Act in line with global best practices and specifically proposes to improve the efficiency of the Nigerian VAT system taking into consideration recommendations from various stakeholder groups. In addition to simplifying the VAT landscape, the Bill also seeks to expand VAT coverage by addressing some critical issues, such as taxation of the digital economy, VAT registration thresholds, and intangibles.
It also intends to amend the Customs and Excise Tariff in a bid to create a level playing field for local manufacturers. Under, this, the government intends to subject certain imported goods to excise duties in similar manner as their locally manufactured counterparts.
The finance bill also seeks to amend the Personal Income Tax and provide clarity and efficiency in the administration of individual income taxes in Nigeria.
With the proposed amendment in the Capital Gains Tax Act, the bill also covers the taxation of business combination and seeks to prevent abuse of a provision of the Act on group restructuring.
The Bill also seeks to increase revenue generation from duties on electronic stamps through an amendment of the Stamp Duties Act Cap S8, LFN 2007.
“The objectives of the Bill, as outlined by the President, are to strategically: “Promote fiscal equity by mitigating instances of regressive taxation; reform domestic tax laws to align with global best practices; introduce tax incentives for investments in infrastructure and capital markets; support small businesses in line with the ongoing Ease of Doing Business Reforms; and raise revenues for the Government by various fiscal measures, including a proposed increase in the rate of Value Added Tax (VAT) from 5% to 7.5%,” Ahmed noted specifically in a statement sent by her media aide, Yunusa Tanko Abdullahi.
“It is our hope that the Bill will be enacted by the National Assembly as soon as possible to support the implementation of the 2020 Appropriation Act. This is expected to encourage growth and investment by the sector of the economy,” she stressed.