The Finance Bill 2019 is crucial to the growth of the Nigerian economy as it would allow the government to realize its annual revenue projections and targets, Minister of Finance, Budget and National Planning, Zainab Ahmed, has said.
The bill, which President Muhammadu Buhari presented to the National Assembly on October 14, has already passed the second reading at the Senate.
The minister said the Bill would provide the government with additional opportunities to incrementally improve its fiscal policy and regulatory/legal environment to further strengthen the domestic capital market, and ultimately ensure sustained and inclusive growth and development.
She was speaking on Tuesday in Abuja at a meeting with some journalists. Mrs Ahmed noted the speed and commitment of the National Assembly in considering the Finance Bill.
Mr Buhari had said the Bill, pursuant to sections 58 and 59 of the Constitution of Nigeria, 1999 (as amended), will promote fiscal equity by mitigating instances of regressive taxation and reform domestic tax laws to align with global best practices.
The Bill is also expected to introduce tax incentives for investments in infrastructure and capital markets; support small businesses in line with the ongoing Ease of Doing Business Reforms; and raise revenues for the government by various fiscal measures, including a proposed increase in the rate of Value Added Tax (VAT) from 5 per cent to 7.5 per cent.
The minister said the Bill is to, among other things, amend some tax provisions; make them more responsive to the tax reform policies of the Federal Government and enhance its implementation and effectiveness
“The Bill contains vast changes to the Companies Income Tax Act, Value Added Tax (VAT) Act, Petroleum Profits Tax Act (PPTA), Personal Income Tax Act, Capital Gains Tax Act (CGTA), Customs and Excise Tariff Etc. (Consolidation) Act and Stamp Duties Act,” Mrs Ahmed said.
The tax to be amended include the Companies Income Tax Act, Cap. C2, Laws of the Federation of Nigeria, 2004 (as amended to date); curb Base Erosion and Profit Shifting (BEPS) as proposed by the Organization for Economic Cooperation and Development (OECD).
The amendment will help broaden the triggers for domestic taxation of income earned by non-resident companies in Nigeria through dependent agents through online market platforms.
In addition, Mrs Ahmed said the Bill will seek to address the taxation of industries, such as insurance, start-ups, and the capital markets evaluated by the government as critical to the growth and development of the Nigerian economy.
The other tax provisions to be amended by the Bill to stimulate and foster overall economic growth include the Value Added Tax Act, Cap V, LFN 2007 (as amended) to bring it in line with global best practice.
The Bill proposes to improve the efficiency of the Nigerian VAT system, taking into consideration recommendations from various stakeholder groups.
Again, the Bill will help simplify the VAT landscape, expand the VAT coverage by addressing some critical issues, such as taxation of the digital economy, VAT registration thresholds and intangibles.
The Bill will also amend the Customs and Excise Tariff etc.(Consolidation), Cap C49, Laws of the Federation of Nigeria 2004 to create a level playing field for local manufacturers.
This will subject certain imported goods to excise duties in a similar manner as their locally manufactured counterparts, while Personal Income Tax Cap P8, LFN 2007 (as amended) will be amended to provide clarity and efficiency in the administration of individual income taxes in Nigeria.
Other amendments through the Bill will be on the Capital Gains Tax Act Cap C1, LFN 2007, which also covers the taxation of business combination to prevent abuse of a provision of the Act on group restructuring.
The Bill will amend the Stamp Duties Act Cap S8, LFN 2007 to help increase revenue generation from duties on electronic stamps.
The minister said the Bill will amend the Petroleum Profit Tax to improve revenue accruable to the government by removing the tax exemptions granted for dividends or income received from companies charged under the Act.
The minister said the Bill will be passed by the National Assembly with the 2020 National Budget and the 2020 Appropriation Act.
She said the proposed modifications to the fiscal terms around taxation are aimed at creating an enabling business environment and alleviating the tax burden for small and medium enterprises to thrive to encourage growth and investment in the economy.