The Federal Government has said it has no plans to introduce new taxes or increase the current ones in 2021. FG said, on the contrary, it is making efforts to reduce the tax burden on Nigerians due to the current economic crises occasioned by the COVID-19 pandemic and the fall in the prices of crude oil. The Minister of Finance, Budget and National Planning, Zainab Ahmed, stated this is Abuja on Friday at a public hearing organised by the House of Representatives Committee on Finance on the Finance Bill 2020.
Ahmed also said the bill would make comprehensive reforms in the nation’s tax laws, which is aimed at exempting Small Scale Enterprises from paying Company Income Tax. The minister also noted that the bill was to address issues in the Finance Act 2019 as well as to deepen the innovations. According to her, the Finance Bill 2020 is largely about taxation and tax administration.
She added that about 1740 persons representing various professional bodies, academics, International development partners, civil society organisations, the private sector as well as key Ministries, Departments, and Agencies of the Federal Government took part in the process of drafting the bill. Ahmed also disclosed that the draft bill was subjected to serious debate at the Federal Executive Council and the National Economic Council before it was transmitted to the National Assembly.
She stated that the principle that guided the bill is the need to adopt critical counter-cyclical fiscal policy as the government needed to adequately respond to economic challenges that occasioned by the pandemic and the crash in crude oil prices. The Minister added, “We also need to defer tax rate increases to the domestic economic sufficiently recover and reduce the compliance burden on tax payers in line with the ease of doing business reforms
“The second principle is the need to reform fiscal incentives policies to help reduce proliferation of fiscal incentives by carefully assessing cost vs benefit of tax incentives and prioritize job creation, growth, and incentives. The government also need closer coordination of monetary, trade and fiscal, adding that this is necessary so that government will be able to align existing tax incentives for lending to agriculture with the recent CBN moratorium and interest rate reduction for agriculture and real sector loans, reform the stamp duty level on banking transaction and make provisions that will help harness funds in form of unclaimed dividends and unclaimed bank balance that has been sitting idle.”
Ahmed stressed that when passed into law, the bill is expected to promote fiscal equity by removing double taxation on companies during commencement and cessation of business, simplify the basis for calculating minimum tax and exempt profits that had been taxed from further taxation in the form of excess dividends.
The law she said aimed to align domestic tax laws with global best practices by introducing significant economic presence rules for taxation of non-resident companies, while also introducing tax incentives for infrastructure and capital market as well as support small business through tax exemption of small businesses from company income tax and reduction in VAT compliance burden for small companies.
The law will also increase revenue for government as it supports the increase of VAT from 5 to 7.5 percent and will also introduce legislative backing for banks to charge stamp duties on electronic receipts. The Minister stressed, “What we don’t have in the Finance Bill 2020 is increase in tax. There are no new taxes that are being introduced and there is no increase in taxes. There are also no new incentives that have been introduced in this bill and will introduce tax reform that has been introduced is geared towards supporting financial stimulus while there are also tax measures that are short, focused and uncontroversial.
“The bill also make provisions to create a legal framework for the creation of a crisis intervention fund that will address crisis that may arise in future, while introducing provisions that allow for the recovery of donations made towards the Covid-19 pandemic and other potential crises.” The Speaker, Femi Gbajabiamila, while declaring the hearing open, noted that the event was to discuss “our ability as a nation to fund the 2021 budget, meet the obligations of government and implement policies to build infrastructure, address the problem of insecurity, grow the economy, and provide jobs that pay a living wage and lift families out of poverty.”
Gbajabiamila added, “However, for this interaction between legislators and the citizens on whose behalf we serve to yield good fruit, all of must take extra care that the contributions we make here today are determined not by narrow considerations of personal or group interests, but fealty to the best interests of the majority of our people and the pursuit of a more peaceful, prosperous and a more economically viable society for all.
“We must also remember that the proper operation of democracy requires that people be willing to listen to and hear each other out especially when they disagree. Let us remember also that whether or not people listen to what you have to say depends not only on the content of your message but also on the manner you choose to deliver it and following therefrom ensure that we observe decorum, and treat each other fairly in the manner of our contributions.”
“The recovery is projected to start in 2021, with subdued growth of 1.5 per cent and output recovering to its pre-pandemic level only in 2022.” The IMF emphasised the need for major policy adjustments and embracing broad market reforms.