Sunny side of new Finance Bill

Owoseni Adio

THERE has been a welter of criticisms from certain quarters over the recently enacted 2020 Finance Bill which President Muhammadu Buhari signed last Monday.

Of course, the impression being created out there is that the policy would further impoverish Nigerians rather than ameliorate their already poor finances to boot. But this is clearly a poor sense of judgment because those who drafted the Finance Bill were unequivocal in articulating the objective principle behind the Bill; which is, to say the least, to improve the economy.

The Financial Act is an amendment to seven extant fiscal laws, which are: the Petroleum Profit Tax Act, the Customs and Excise Tariff Act, the Company Income Tax Act, the Personal Income Tax Act, the Value Added Tax, the Stamp Duties Act and the Capital Gains Tax.

President Buhari said the Act has five strategic objectives, in terms of achieving incremental, but necessary, changes to the fiscal laws.

These objectives are: Promoting fiscal equity by mitigating instances of regressive taxation; Reforming domestic tax laws to align with global best practices; Introducing tax incentives for investments in infrastructure and capital markets; Supporting Micro, Small and Medium-sized businesses in line with our Ease of Doing Business Reforms; and Raising Revenue for Government.

The new law is expected to make more revenue available to finance key government projects in health, education and critical infrastructure.

One of the features of the new law is that those who want to open or maintain accounts with banks will provide their Tax Identification Number (TIN).

The strategic objectives in the Finance Bill recognises the crucial relationship between fiscal policy, the regulatory environment and the strong capital market we all seek to effect in Nigeria.

The Act is actually a pro-poor initiative by this administration to tax the rich for the benefit of the masses. What this Act has done in essence is to exempt items close to the poor from payment of VAT while aggressively piling it up on luxury goods and items consumed by rich and elite.

Amongst other things, the newly signed bill expands the VAT-exempt items to include honey, bread, cereals, cooking oils, culinary herbs, fish, flour, starch, fruits, meat, poultry, milk, nuts, pulses, roots, salt, vegetables, water, sanitary pads, tampons, tertiary, secondary, primary and nursery tuition.

Interestingly, the Finance bill has exempted small businesses with a turnover of less than N25m from Companies Income Tax and Value Added tax (VAT). It also reduced company Income Tax rate from 30% to 20% for medium-sized companies with a turnover between N25m and N100m. It also shows the government is empowering tax incentives through the Act, for example, a bonus of 2% of tax payable (medium-sized companies) and 1% for large companies for early payment of Companies income tax.

Expectedly, companies with an annual turnover of less than N25m exempted from paying tax represent more than 25 million registered companies in Nigeria. This exemption will lead to more funds available for these companies to reinvest, grow, expand and create more jobs. These are creative ways of enabling businesses, and by extension creating jobs. Finance bill is not about taxing Nigerians.

According to the Minister of Finance, Budget and National Planning, Hajia Zainab Ahmed, the date for the annual budgets to be presented before the National Assembly in the future will be accompanied by a Finance Bill, as such it will provide the country 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.

Besides, the law will make the 2020 budget “executable,” as well as make doing business easier for the micro, small and medium enterprises by reducing their tax burden, and to make the national expenditure rely less on oil and gas revenues.

To recapitulate the words of the Senior Special Assistant to the President on National Assembly Matters (Senate), Senator Babajide Omoworare, the Act combines the amendment of seven extant fiscal laws into one.

“What we have done with one bill is to amend seven other bills that deal with the revenue stream of the budget. This is the first time we are doing it in this democracy, but it used to be the standard, even under the military, once the budget is done, there is a Finance Bill that explained how the funds would be made to support the budget and to talk about amendments within the ambit of these seven revenue generating acts that I’ve mentioned.”

The essence of increasing some taxes and tariffs, to a large extent, is to encourage production ultimately as well as diversification of the economy, thus moving away from oil and gas and ensuring that manufacturing remains stable. Can Nigeria afford a situation where things should be allowed to get so bad and beyond redemption? Shouldn’t we support a system tailored towards turning the economic tide for good? This is the ideal and idea behind the new law, which every well-meaning Nigerian should support.

• Adio, a public affairs analyst, writes from Lagos