By Francis Ogwo
The 2020 Finance Bill has been approved by The Federal Executive Council chaired by President Muhammadu Buhari on Wednesday.
Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed this during an interaction with the media.
According to her, the 2020 Finance Bill which would complement the 2021 Budget will be forwarded to the National Assembly for consideration and passage while adding that it was designed to engender incremental changes in the nation’s tax laws.
Ahmed noted that the passage of the bill into law will not lead to increase in taxes in the country. According to the minister, the bill, when passed into law, will ensure improvements in the tax laws while also reducing some taxes, especially for small and medium enterprises.
The minister pointed out that some taxes had already been reduced in the 2019 Finance Bill. She said taxes were reduced from 30 per cent to 20 per cent for enterprises that have turnover of between N25 million to N100 million in the preceding bill. Ahmed affirmed that the economic situation in the country does not warrant increase in taxes, saying: “This is not the time to increase taxes.”
Details of the bill as read by the minister stated: “Through this finance bill, what we are seeking to do is to make incremental changes to tax laws relating to Customs and Excise as well as other fiscal laws to support the implementation of annual budget.
“When Mr. President presented the 2021 budget to the parliament, he did direct that the 2020 Finance Bill will also follow to support the budget proposals.
“We are working on implementing current fiscal reforms in line with the Multi-year Medium Term Framework and over time, we hope that this Finance Bill, that the fiscal space will be reformed on an incremental basis.
“So this Finance Bill for 2020 was developed as a result of a very large multi-stakeholder effort under Fiscal Policy Reform Committee that has several ministries, departments and agencies as members, but also the private sector, experienced tax practitioners and academics.
“During the process, we received a lot of suggestions from different stakeholders, but we had to limit what we could take because, we are by three principles – to adopt appropriate counter fiscal measures to manage the economic slowdown, incrementally reforming the fiscal incentive policies of government and ensuring closer coordination between the monetary trade as well as fiscal authorities.
“The broad principle is to consider how we will have adequate macroeconomic strategies to attract investment, to be able to grow the economy on a sustainable basis, but also to create jobs as the immediate fiscal strategies to put in place accelerate domestic revenue mobilization in response to COVID-19 pandemic and the recent decline in the economy.
“In producing this bill, what we were inadvertently doing was amending provisions in 13 different taxes which include the Capital Gains Tax Act, Companies Income Tax Act (CITA), Industrial Development (Income Tax Relief) Act (IIDITRA), Personal Income Tax Act (PITA), Tertiary Education Trust Fund Act, Customs & Excise Tariff (Consolidation) Act, Value Added Tax Act (VATA), Federal Inland Revenue Service (Establishment) Act, the Fiscal Responsibility Act and the Public Procurement Act. “Some highlights of these provisions include: amendments that we have had to make to provide incremental changes to tax laws.These amendments include providing fiscal relief for corporate taxpayers, for instance, by reducing the applicable minimum tax rate for two consecutive years. So from 0.5 per cent to 0.25 per cent.
“These reforms will commence and will also be closely followed by the cessation rules for small businesses as well as providing incentive for mass transits by reducing import duties and the levies for large tractors, buses and other motor vehicles. The reason for us is to reduce the cost of transportation which is a major driver of inflation, especially food production.” Continuing, the minister hinted that the bill also proposed the creation of Crisis Intervention Fund in cases of eventualities.
The minister further stated: “We also have proposed measures to create a legal instrument that supports a crisis intervention fund such as, the crisis intervention that we have had to put in place for COVID- 19. So we hope that we don’t have other crisis, but we need to create such a fund so that it is available and it is legislated.
“We are also amending the Fiscal Responsibility Act to enhance fiscal efficiencies and also to control the cost revenue ratios of government-owned enterprises, so that we will be able to realize more operating surpluses from these enterprises.” Asked specifically whether the new bill will not impose more tax burden on the people, Ahmed said: “In the last Finance Bill 2019, we reduced taxes from 30 per cent to 20 per cent for enterprises that have turnover of between N25 million and N100 million.
We also moved taxes from 30 per cent to zero per cent for enterprises that have turnover of N25 million and below which means they pay no taxes. “What we are doing in the Finance Bill 2020 is to further reduce the Education Tax of two per cent for that lower category of enterprises that have turnover of N25 million and below.
“So when we say incremental, it means gradually making changes, it means the changes may be up or down. But for now, with the economic slowdown, our assessment is that this is the time to cut down on taxes, not to increase taxes and levies. This is the time that we need to do that and that is what we are trying to do. “Another example is the reduction in the duties for vehicles that will be related to the mass transit. Again, no increase in taxes and no increase in VAT.” Ahmed concluded.