Grace Cofie
The Federal Government has annouced that there is no change to be made to the value-added tax (VAT) and stamp duty regime in the 2021 finance bill.
This statement was made by the Minister of Finance, Budget and Planning, Zainab Ahmed.
The Federal Executive Council (FEC) presided over by President Muhammadu Buhari approved the bill at its meeting on Wednesday.
This bill read that the federal government will retain 7.5 per cent as the VAT rate in the 2022 fiscal year.
Ahmed said the bill which is currently before the national assembly, focused on tax as well as reviewing and amending some 11 fiscal laws.
“Again, to emphasize also, that we shield away from addressing any changes to the VAT regime or the current Stamp Duty regime because of the current ongoing litigations by some states in those two areas,” Ahmed said.
“So, nothing was proposed on this till it becomes clearer when the courts take a decision on this matter or resolutions to the current challenge is attained.”
She further explained that rather than proposing new taxes, the finance bill for the 2022 fiscal year focuses on closing loopholes and improving tax administration.
“This draft bill was prepared by the Fiscal Policy Committee and it’s focused on tax and reviewing some fiscal laws and also amending some and these laws, about 11 in number, that have been affected.
“The purpose for us is to be able to refine our fiscal laws to improve tax compliance and also to enhance revenue generation.” She said.
The finance minister said the proposed legislation falls under five categories.
“The first one, of course, is domestic revenue mobilization and various measures are proposed in the bill to enhance revenue and these include: one is limited, excellent exemptions of the case from shares disposals from capital gains tax to long term equity investments, out to a close in tax loopholes for companies that are transmitted from the previous federal public tax regime to the world corporate tax and have recovered tax regime that is provided under the new petrol industry act of 2021.
“There are also provisions that have been made to prevent the abuse of Personal Income Tax released by individual taxpayers and allowances to evade taxation.”
Ahmed said the bill empowers the Federal Inland Revenue Service (FIRS) to collect Company Income Tax (CIT) from profits made by foreign digital companies with “significant presence” in the country.
Talking about the second broad category, the minister highlighted Tax Administration Reforms which includes provisions to support the FIRS ongoing reforms to fully automate and deploy technology to enhance collections and encourage taxpayer compliance.
She further said, “the third one is International Taxation Reforms.
“This provision empowers the FIRS to better assess non-resident companies to taxation by taxing profits derived from digital services rendered to Nigerian customers and it’s also designed to reduce the tax compliance burdens on non-resident taxpayers that are not required to register in Nigeria as companies.”
The fourth broad objective of the Finance Bill is financial reform to enhance tax equity.
Explaining this, the minister said, “Most of these provisions that have been made are to enhance ongoing capital market reforms relating to securities lending transactions, real estate investment trusts, as well as the minimum taxation reductions that have been pioneered by the two previous Finance Bills.”
On the final broad objective, “The fifth principle is Critical Public Financial Management and Reform.
“This reform was designed to strengthen the FIRS tax administration and coordination role in relation to the collection of taxes, vis-a-vis the responsibilities of relevant law enforcement agencies, such as the Nigerian Police or the EFCC and also to ensure and reinforce the supremacy of the fiscal rules and regulations as provided for by the Finance Controls and Management Act, as well as the 1999 Constitution, as amended.” Ahmed explained.
