Buhari’s Finance bill:Nigerians brace up for tough times

.New Tax regime to commence amidst high inflation

.Experts dissect gains, loopholes of Finance bill

Nigerians are in for tough times in the days as the Finance bill initiated by the Federal Executive Council (FEC) which is aimed at increasing Nigeria’s Value Added tax from 5 per cent to 7.5 per cent is gradually becoming a reality with the both chambers of the National Assembly passing the bill recently.

As it stands, the only factor delaying a new tax regime for Nigeria is President Muhammadu Buhari’s assent.

The Finance bill seeks to amend seven tax laws in the country which include Value Added Tax, Personal Income Tax and Petroleum Profit Tax.

Others include Companies Income Tax, Capital Gains Tax, Stamp Duties Act and Customs and Excise Tariff.

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However, Nigerians are yet to come to terms with the ingredients of the bill as major focus has just been placed on Value Added Tax.

Earlier, President Buhari said the bill is to reinvent tax laws and provide tax incentives and investments into the country.

Investigations by the Daily Times had earlier shown that Nigeria pays the least Value Added Tax among the top five African economies as countries like Kenya and Ghana pay Value Added tax of as high as 30 per cent as the case may be.

Although the bill has its own grey areas which Nigerians have heavily criticised especially the Value Added Tax component of the bill, there are other components of the bill which business environment and Nigerians may not have paid attention to.

For instance, the bill has now exempted companies with a turn-over of less than N25 million and equally reduced Company income tax of companies with N25-N100 million profit from 30 per cent to 20 per cent.

However, some stakeholders who spoke to the Daily Times on the impact of the new tax regime, said it may not go down well with Nigerians considering the impact of high inflation which is already biting hard on citizens already.

Chris Mamuda, Chief Executive Officer of Global Spring, said although the policy may turn more revenues for the government, the timing was wrong.

“When you look at our economic indices, it is not looking good as our GDP is low compared to population growth and food Inflation again will still be on the high side due to border closure.

“Considering that Nigerians have to battle with high prices of commodities, increasing VAT especially is not a welcome development at this time.

“But as it is government is looking for revenue to fund the budget and it is unfortunate that it is Nigerians that will pay for it,” he said.

Also, a public affairs analyst, Mike Uzor, said Nigerians already have enough on their table, and bringing a new tax regime will further impoverish citizens.

“Nigeria is already the poverty capital of the world and the government want to impoverish citizens the more.

“Charges on POS, stamp duty and other forms of financial service charges already have their impact on Nigerians, so bringing more charges will bring more poverty.

“Although there are components of the tax bill that suites businesses, majority of the components of the bill do not favour ordinary Nigerians,” he added.

Meanwhile, dissecting the Finance bill, the Deputy Vice President of Chartered Institute of Taxation of Nigeria (CIBN), Samuel Olushola Agbeluyi, said the institute backs the bill as it has clarified several grey areas in Nigeria’s tax institute.

“This is the first time in 20 years that the budget is accompanied with a finance bill. Before now, politicians make blank statements on capital projects without telling the people how they intend to execute the project and with what revenue.

“As such the finance bill is specific on what is expected. The institute of taxation has been clamouring for this bill for several years to explain in clear terms how government intends to generate revenue and it is obvious that there is a link between the ease of doing business among the SMEs and the bill which is to allow them thrive and operate. As such, it is the first time managers of the economy are listening to professionals.

“The CITN has identified a minimum of 18 benefits identified with the bill, one of it is that there are definitions and explanations and the information is now no longer at the discretion of the revenue agency, which is the Federal Inland Revenue Service.

“Some of the positives of the bill as you know is that companies with returns not up to N25 million are exempted from paying company income tax, and the flat rate 30 per cent tax has now been reduced to 20 per cent.

“Usually the Company Income Tax is 30 per cent but now companies with turn-over of N25 million to N100 million has been reduced to 20 per cent and anyone conversant with figures will know that 10 per cent of any figure is material amount. So companies under N25 million turnover now do not have to pay VAT and this is a major boost.

“The insurance sector discrimination has also been settled as well as the relationship between debt and equity in business,” he said.

He, however, noted that the bill has some loopholes which the institute had earlier raised alarm on.

“One of the problems which the Chattered Institute of Taxation of Nigeria identified is that there should be an exact threshold of N25 million because a company may have a turn-over of N25 million in a particular year and may have lesser amount in the preceding or succeeding year, which the minister of finance, budget and national planning has now clarified, saying the turnover of the previous year will be the account to be considered.

“As such any turnover that is below the N25 million recorded in preceding year will be reported to the FIRS so that the company in question can be removed from companies eligible to pay VAT.

“Also, one of the negatives of the bill is the minimum tax where it states that whether you make profit or not, there is a minimum amount of tax that a company must remit to the FIRS. For us, we believe minimum tax is capital erosion because a company has not made profit yet and it is the company’s fault so why should they pay minimum tax?

“Almost all stakeholders that were at the public hearing in the senate were against the 5 per cent minimum tax turnover because 97% of what the executive set were adopted by the Nigerian Senate,” he added.

The CITN vice president further stated that companies that may want to under-declare profit will not escape it as there is mechanism by the Federal Inland Revenue Service called the desk review which looks at the companies account and variable to check.

He added that there is what is called tax audit where the revenue agency audit taxes will serve as a veritable tool in checkmating those culpable.

Also commenting on the bill, Mathew Ojo, director of advocacy and research at the Lagos Chamber for Commerce and Industry, said: “From the business angle and the positives of the bill, it looks at companies with turnover of less than N25 million not filing for VAT. The terms exempted for Value Added Tax have now been expanded as they are now considering the poor people. Apart from the pharmaceuticals and commodities that were initially exempted, we have more of them added now vegetables, fruits so that ordinary Nigerians will not feel the pinch of the bill”.

However, Ojo said the government would have explored other ways of revenue generation other than increasing tax.

“When you start comparing other climes that you say their VAT are higher than Nigeria, there are some certain things that must be taken into consideration, like the business environment which is conducive over there, but in Nigeria, businesses are struggling. The bill is trying to segregate the small from the big businesses but even big businesses are struggling as power, infrastructure and cost of production is huge.

“Government needs to raise revenue but there are other ways of raising revenue other than VAT and other components of the bill. The bill has addressed so many issues people have been clamouring. How many companies make a turnover of less than N25 million annually, some two million operate under an informal structure.

“Even companies assumed to be big are struggling, this doesn’t take out the fact business are struggling and the side of it so that revenue can be increased. For now, the environment is harsh, so government would have increased revenue through investments, looking at areas where tax hasn’t been collected before like the foreign tax so that you drive revenue and allow businesses to drive,” he lamented.

He said the concerns of many experts is that businesses would have been given sometime to grow before introducing the finance bill as most businesses now fund their infrastructure and provide electricity leading to a very low turnover.

If given assent by President Buhari, the new tax regime is expected to commence at the beginning of 2020.