- TIN now compulsory for bank account holders
- Implementation to wait till gazette
The Value Added Tax (VAT) goes from five per cent to 7.5 per cent following President Muhammadu Buhari’s signing of the 2020 Finance Bill.
He signed the Bill on Monday according to Presidential spokesman Femi Adesina.
But the implementation will be delayed till the new law is gazetted. It is not clear how soon this will be done.
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).
Senior Special Assistant to the President on National Assembly Matters (Senate), Senator Babajide Omoworare, said the Act combines the amendment of seven extant fiscal laws into one.
According to him, the law will make the 2020 budget “executable,” besides making 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.
“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 action of Mr President is like a modulation of fiscal regulations in response to what is considered the global best practices and the macroeconomics trends. So what it does is to react every year to what must have happened, either to increase the revenue or the other way around, but basically, it’s not as if it wants to increase the burden on the people. If at the end of a year, it is seen that a belt needs to be loosened, it will be loosened by another amendment.
“Talking about the Value Added Tax, only 15% to goes to the federal government, 50% goes to the state and 35% goes to the local government councils.
Explaining the essence of increasing some taxes and tariffs, he said “to a large extent, we are looking at a situation where production is encouraged. The essence is to encourage production, diversification of the economy, moving away from oil and gas and ensuring that we look at manufacturing. If you don’t produce as a nation, you’ll have challenges”.
The Lagos Chamber of Commerce and Industry (LCCI) commended the federal government on some of the expected positive impacts of the finance bill.
Its Director-General, Dr Muda Yusuf, made the commendation in a statement yesterday.
Yusuf said a number of favourable provisions for small businesses were reflected in the law.
He said the impact on government revenue would be positive, especially for states and local governments, as their fiscal position would be enhanced.
He, however, expressed concern on the impact the Value Added Tax (VAT)increment would have on businesses and end users from the cost pressure perspective, due to the high cost in operating environment.
Yusuf also expressed concern over the provision on minimum tax, saying that it was inappropriate to compel loss-making firms to pay tax, no matter how little.
“The finance bill has a number of favourable provisions for small businesses and this is an aspect to commend.
“However, the VAT increment would impact adversely on businesses from cost pressures perspective.
“Margins would be affected, depending on the extent to which additional costs could be passed to consumers.
“We worry that we are operating in a high cost environment and also have the worry about the provision on minimum tax which we had argued against this provision.
“It is inappropriate to compel loss- making firms to pay tax, no matter how little. This amounts to erosion of capital,” he said.