The Federal Government, yesterday, assured operators in the manufacturing sector that with the implementation of the new tax laws, better days are here for them, noting that some key features and changes in the new tax laws will stimulate inclusive growth and enhance the sector’s competitiveness.
The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele, who gave the assurance at a ‘Hybrid Stakeholders’ Engagement’ held at MAN House, Ikeja, Lagos, said the tax laws offer a suite of strategic benefits targeted at boosting the domestic and global competitiveness of Nigerian manufacturers.
The session was themed ‘From Legislative Assembly to Factory Floor: What the New Tax Laws Mean for Nigerian Manufacturers,’ with Oyedele listing some of the key changes that will significantly benefit manufacturers to include tax exemptions for small companies, reduced compliance for micro-businesses, and incentives for investment among others
Oyedele said, for instance, that under the new tax regime, small and medium-scale manufacturers and businesses with an annual turnover of N100 million or less are now fully exempt from Companies Income Tax (CIT).
While there is zero per cent CIT for small & medium size companies, Oyedele said for larger firms, the plan is to reduce the CIT rate from 30 per cent to 20 per cent, pointing out that this will bring Nigeria’s rates in line with global competitive standards.
The Tax Reforms Committee Chair also said the new tax regime introduced the Economic Development Incentive (EDI) scheme, replacing the older “pioneer status” holidays.
The EDI offers a five per cent annual tax credit for five years on qualifying capital expenditures, which encourages manufacturers to invest in modern machinery and advanced technology.
The new tax laws, according to Oyedele, also allow manufacturers to recover input Value Added Tax (VAT) on all purchases, including services and fixed assets. This eliminates the previous “hidden cost” of non-recoverable VAT, directly improving cash flow and reducing the cost of production.
That’s not all. There is provision for zero-rated essential goods aimed at stimulating demand and supporting social welfare, basic food items, medical supplies, and educational materials.
Manufacturers in these sectors can now claim full VAT refunds on their inputs while charging zero per cent to the end consumer, making locally produced goods more affordable.
Also, under the new tax laws, designed to simplify the tax landscape and incentivize production, input VAT on taxable supplies, including services and fixed assets, may be deducted from the output VAT payable, but only to the extent the input tax was incurred for making taxable supplies.
However, the portion relating to non-taxable supplies is not deductible. Manufacturers are also exempted from VAT on diesel, which currently contributes to their high cost of production, because of the exorbitant cost of diesel.
The charging and collection of VAT on petroleum products, renewable energy equipment, Compressed Natural Gas (CNG), Liquefied Petroleum Gas (LPG), and other gaseous hydrocarbons may be suspended by an Order from the Minister.
Oyedele also said a lot of the tax reforms are targeted at the capital market, noting, for instance, that all investors in the stock market are eligible for Capital Gains Tax (CGT) exemption either unconditionally or subject to re-investment.
Withholding Tax (WHT) on bonus shares has also been eliminated. There are also provisions for tax exemption for state government bonds, stamp duty exemption for all documents relating to the transfer of stocks and shares, as well as faster and clearer rules for tax offsets and refunds.
The new tax laws, according Oyedele, also simplified compliance by making e-invoicing, fiscalisation and real-time reporting mandatory.
The transition to a digital, automated e-invoicing system under the Nigeria Revenue Service (NRS) will reduce the administrative burden on tax departments, allowing firms to focus more on core industrial operations.
Perhaps, the icing on the cake of the new tax regime is the provision for Tax Ombud to protect taxpayer rights including moderation of excessive regulatory fees.
Oyedele explained that the Tax Ombud is an independent and impartial arbiter, to conduct enquiries, institute legal proceedings on behalf of a taxpayer, and act as a watchdog against arbitrary tax policy.
In highlighting the strategic benefits of the new tax laws for Nigerian manufacturers, Oyedele said the tax reform was necessitated by the need top to address inequity and promote shared prosperity.
He said the reforms were intended to mend Nigeria’s broken tax system which he described as “fragmented, complex, unconducive for growth, regressive, and a high burden on Nigerians and businesses.”
The reform objectives, according to him, are designed to usher a regime of fairness, harmonisation, efficiency, ease of doing business, transparency, and economic development.
He said macroeconomic stability and growth, rising investor confidence, harmonisation, and modernisation are already indications that Nigeria is inching closer to realizing the objectives of the reforms.
Oyedele emphasized that the reforms are a “bold step” towards a competitive Nigeria, encouraging dynamic engagement from businesses to leverage these changes for growth, better revenue generation, and increased domestic and foreign investment.
