The Federal Government, on Wednesday, said it is offering more tax incentives to Nigerians in the proposed 2020 Finance Bill to cushion the socio-economic condition in the country, especially in the wake of the lockdown that followed the Coronavirus (COVID-19) pandemic.
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 listed some highlights of the proposed bill to include a 50% reduction in minimum tax.
The proposed bill sets minimum tax at 0.25%, from 0.5% of gross turnover for financial years between January 2020 and December 31, 2021; a reduction in duties on tractors from 35% to 10%; same as on motor vehicles for the transportation of goods. Levy on motor vehicles for the transportation of persons (cars) is also cut from 35% to 5%; just as small companies (with less than N25m turnover), are exempted from paying education tax under the Tertiary Education Trust fund (TETFUND).
She said the incremental changes referred to in the bill does not mean increasing taxes, but an improvement in the tax law, stressing that the country’s value added tax remains at 7.5%.
A statement by the Office of the Vice President, Prof. Yemi Osinbajo, said the principles underpinning the proposed fiscal and other reforms include 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;
Mrs. Ahmed recalled “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,” she added.
The Minister also announced the granting of tax relief to companies that donated to the COVID-19 relief fund under the private sector coalition (CACOVID), in what she stressed, is to serve as an acknowledgment and encouragement of such behaviour.
According to The Finance Act 2019, the template for the proposed 2020 Bill, provides fiscal relief for corporate taxpayers by reducing the applicable minimum tax rate for two consecutive fiscal years, 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);
Others are: 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; in addition to 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
There is also the amendment of the Public Procurement Act to implement key procurement reforms previously proposed by the National Assembly to extend the 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.