Far-reaching recommendations on the economic direction of the Bola Ahmed Tinubu Administration were submitted to the President yesterday.
The Taiwo Oyedele-led Presidential Fiscal Policy and Tax Reform Committee got the presidential stamp and the directive to present the proposals to the Federal Executive Council (FEC) for approval.
The committee made 20 recommendations covering diverse areas such as taxation, job creation, foreign exchange reform, ease of doing business, investment, temporary action to relieve the pains of petrol subsidy removal and general direction of the economy.
Oyedele made the recommendation public on his X (formerly Twitter) handle last night.
On Monday, during the 29th meeting of the National Economic Summit Group (NESG), Minister of Finance Mr Wale Edun hinted at an impending digitisation of the Forex market.
Oyedele’s panel has proposed the digitisation of the foreign exchange (FX) regime.
Specifically, it wants the modernisation of the FX system to discourage speculation and hoarding of foreign currency in cash.
Another demand made of the government by the Committee is the imposition of excise tax on FX transactions.
It wants taxes imposed on FX transactions that occur outside the official market to generate revenue.
The committee also wants the government to implement forward contracts for the importation of Premium Motor Spirit (PMS) as a short-term solution while waiting for improvements in key economic indicators.
A breakdown of the recommendations are:
Taxation: The committee suggested to the Federal Government the resolution of the contentious issue of multiple taxation.
It is asking for the suspension of multiple taxes by temporarily suspending those that disproportionately affect low-income individuals and small businesses and compensating for lost revenue from certain agencies.
Tax ProMax Modification: Modifying the Tax ProMax system will allow taxpayers to make partial payments of their outstanding tax liabilities.
Data4Tax: This involves utilizing technology, especially a data-driven system, to expand the tax base, making it easier to identify and collect taxes from a wider range of individuals and businesses.
Personal Income Tax: The committee would like to see an increase in the threshold at which personal income tax is applicable and allow for a higher personal relief allowance, which would reduce the tax burden on individuals.
Tax Break for Private Sector: When implemented, this will offer tax incentives to the private sector, such as tax breaks for increasing wages to low-income workers, providing transport subsidies, and creating more jobs, encouraging economic growth.
Payment of Taxes in Naira: This will allow Nigerian businesses to pay taxes on foreign currency-denominated transactions in Naira, thus simplifying tax compliance.
The committee has called for withholding tax reforms. By simplifying the withholding tax regulations, the committee wants to reduce the financial burden on businesses’ working capital.
Waiver of Penalties and Interests: Oyedele and his team are advocating the granting of waivers on penalties and interest charges for taxpayers who fully settle their outstanding tax liabilities before December 31, 2023. This will incentivize tax compliance.
FX Reforms: The committee wants the FX market expanded. Specifically, they want the incorporation of Bureau de Change (BDCs), forex apps, and retail forex dealers into the official foreign exchange market, aiming to curb the black market.
There is a call to digitalise the FX regime. Modernising the foreign exchange system is intended to discourage speculation and hoarding of foreign currency in cash.
Excise Tax on FX Transactions: The committee has recommended the imposition of excise taxes on foreign exchange transactions that occur outside the official market to generate revenue.
Forward Contracts for PMS: Implementing forward contracts for the importation of Premium Motor Spirit (PMS) as a short-term solution while waiting for improvements in key economic indicators is another demand made by the committee.
The committee wants the discontinuation of the FX Verification Portal.
Discontinuing the foreign exchange verification portal and relaxing the requirements for certificates of capital importation and export proceeds restrictions will potentially make foreign investment and forex transactions more accessible.
Social Intervention: To cushion the effects of the decision to put an end to fuel subsidy, the government has been advised to implement VAT suspension and tax waivers. Temporarily suspending Value Added Tax (VAT) on diesel and granting tax waivers on Compressed Natural Gas (CNG), CNG conversion will bring down the cost of transportation and more vehicles will change from using PMS to diesel or CNG. Bringing down the cost of transportation will spill over to a reduction in the price of transported items and invariably either hold inflation steady or force it downwards.
On the international scene, these decisions will position Nigeria as a country determined to use renewable energy items and cleaner energy sources.
Mobile Phones for Cash Transfers: This will promote the use of mobile phones for conditional cash transfers and create a framework to manage the subsidies’ removal and forex reform windfall, with transparency through a national portal to track government spending.
Civil Service Reform: This suggests streamlining government functions to avoid redundancy, managing public finances wisely, and optimising the use of government assets and natural resources to ensure efficiency and cost-effectiveness.
Policy Signaling and Collaboration: This is to encourage collaboration among various government agencies (MDAs) and economic management teams to align policies, signal intentions, and coordinate efforts for effective policy execution.
Global Employment Opportunities: Removing obstacles that hinder Nigerians in Nigeria from accessing global job opportunities can potentially boost income and employment prospects.
Export: The committee wants the removal of bottlenecks for export expansion grants, allowing easier repatriation and utilisation of export proceeds by exporters, which in turn will encourage international trade.
Tariff Review: Oyedele’s committee is asking for a comprehensive review of tariffs on the 43 items unbanned from accessing forex in the official market and a fiscal policy review of other items prohibited for imports. This suggests that the committee would like to see the re-evaluation of the tariff on these 43 items and others to facilitate beneficial cross-border trade.