THE tax reforms contained in the Finance Act 2020 will enable the federal government to hit its N8.155 trillion non-oil revenue target to fund this year’s budget according to Finance and Budget Planning Minister Zainab Ahmed.
President Muhammadu Buhari signed the fiancé bill on Monday.
In a statement on Tuesday, the minister explained that “a large sum of money realised from taxation would rather go to the people; the states and the Local Government Areas (LGAs) are to get 50 per cent and 35 per cent respectively while only 15 per cent will go to the Federal Government.”
She added that the law allows “the expansion of VAT exemption list which includes: basic food items (agro and aqua based staple foods) such as additives, cereals, cooking oils, culinary herbs, fish of all kinds (other than ornamented), flour and starch, fruits, live or raw meat and poultry, milk, nuts, pulses, roots, salt, vegetables, and water; Locally manufactured sanitary towels, tuition (primary, secondary and tertiary education); and services rendered by microfinance banks.
“Future finance bills will also provide us 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.”
She added that the law had also taken care of essential palliatives to support Micro-Small and Medium Enterprises (MSMEs) and mitigate the impact of the VAT rate increase on the most vulnerable businesses, communities and citizens in the economy.
Some of these measures are expansion of the list of VAT-exempt items (e.g. basic food items, educational materials and medical supplies) and Introduction of a VAT registration threshold for MSMEs with a turnover of less than N25 million per annum.
Others are the reduction of the corporate tax rate for MSMEs from 30 per cent to 20 per cent for Small firms (with turnover of between N25million and N100million per annum.) and exemption of micro-firms (with turnover of less than N25million per annum).
On the implementation process of the law, the minister said she will issue a statement in due course.