The Finance Bill 2020 has scaled first and second readings at the Senate.
The speedy passage of the bill was due to it’s importance, the Senate President, Ahmad Lawan, said.
President Muhammadu Buhari had, on Tuesday, transmitted the legislation to the Senate for consideration and passage.
The bill, among other things, seeks to amend over ten tax-related Acts.
Part of the amendments is Section 19 of the Value Added Tax Act which increases the penalty payable by a taxable person for non-remittance within the specified period from five per cent to ten per cent.
Section 28 of the same Act also increases the penalty for failure to give notice of change of address or permanent cessation of business from N5,000 to N50,000 in the first month and N25,000 in subsequent months.
A new Section 8 of the Act was provided to cater for the registration of a taxable person upon commencement of business.
The penalty for failure to register has been increased from N10,000 to N50,000 in the first month and from N5,000 to N25,000 in the subsequent months.
The time within which a taxable person is required to register with the service is however, not specified under the new law as the law simply hinged the time “upon commencement of business.”
The value added tax payable by consumers was retained at 7.5 percent while a new Section 15 of the Act introduces a threshold for VAT compliance. Thus companies with turnover of N25,000,000.00 or more shall render their tax on or before the 21st of every month.
Deliberation/details of the bill
The second reading of the bill was sequel to a debate led by the Senate Leader, Abdullahi Yahaya.
The Acts that the bill seeks to amend, according to his presentation, include the Capital Gains Tax Act; Companies Income Tax Act; Personal Income Tax Act; Tertiary Education Trust Fund (Establishment) Act; Customs and Excise Tariff, etc (Consolidated) Act and the Value Added Tax.
Others are Federal Inland Revenue Service (Establishment) Act; Nigeria Export Processing Zone Act; Oil and Gas Export Free Zone Act; Fiscal Responsibility Act; Companies and Allied Matters Act 2020; and Public Procurement Act; in order to make further provisions in connection.
Some objectives of the bills include reforming extant Fiscal Policies to prioritise job creation, economic growth, socio-economic development, domestic revenue mobilization, as well as to foster closer coordination with Monetary and Trade Policies.
It is also aimed at adopting appropriate counter-cyclical fiscal policies to respond to the economic and revenue challenges precipitated by the decline in international oil prices, as well as the impact of the COVID-19 Pandemic on the economy;
The bill provides fiscal relief for taxpayers by reducing the applicable minimum tax rate for two years of assessment, as well as reforming the conunencement and cessation rules for small businesses.
It also proposes measures to fund the federal government’s COVID-19 Pandemic response and introduce provisions to enhance the recovery of corporate donations towards responses to the COVID-19 Pandemic and any similar crises in the future.
Capital Gains Act
Section 36(2) of the Capital Gains Tax Act is amended that exemption on tax liability for compensation for loss of office which was hitherto limited to N10,000 is now extended to N10,000,000.
There is also a new Section 32 which provides that no tax shall apply to any trade or business transferred to a Nigerian company for the purposes of better organisation of that trade or business etc.
This tax exemption is, however, not applicable if the acquiring company subsequently disposes of the assets within one year of acquiring same.
Personal Income Tax Act (PITA)
Section 49 of the PITA has been amended to make the provision of Tax Identification Number mandatory for persons intending to open a new bank account for purposes of business operations or for continuation of operation of such bank account.
Mr. Yahaya said it is imperative that the Nigerian tax legislation is updated frequently to respond to the challenges of today’s business environment.
While the Finance Bill is intended to support the funding of the 2021 budget, he said it contains several long awaited changes to the tax framework which seek to address issues of low tax revenue growth, such as an increase in the VAT rate and the introduction of tighter deductibility rules.
“It also seeks to provide a boost to small and medium scale enterprises by reducing their tax burden. And to replace existing tax incentives with more targeted incentives to stimulate economic activity in the capital market and infrastructure sectors.
“Overall, the provisions contained in the Finance Bill are intended to incentivise economic activities to stimulate GDP growth and facilitate increase in the revenue generated.”
The lawmaker further called for public tax education and sensitisation and urged the FIRS to put in place structures to plug revenue leakages and ensure transparency in the appropriation of VAT funds.
Lawmakers in the chamber took turns to comment on the bill and its timely passage.
The legislation was, thereafter, referred to the Senate committees on Finance, Customs and Trade and Investment for further legislative work and to report back in three weeks.