By Rotimi Fadeyi,
The Federal Government on Wednesday said there was no plan to increase taxes or Value Added Tax (VAT).
Minister of Finance, Budget and National Planning, Zainab Ahmed disclosed this while briefing State House correspondents shortly after the Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari at the Presidential Villa.
The minister, who also disclosed that FEC approved the Finance Bill for 2020, explained that it was not the time to increase taxes or any levy, but to cut them.
She said: “in the last Finance Bill 2019, we reduced taxes from 30 percent to 20 percent for enterprises that have turnover of between N25 million to N100 million.
We also moved taxes from 30 percent to zero percent for enterprises that have turnover of N25 million naira and bellow which means they pay no taxes.
“What we are doing in the Finance Bill, 2020 is to further remove the education tax of two percent for that lower category of enterprises that have turnover of N25 million naira and below.
“So when we say incremental, it means gradually making changes, it means the changes may be up or down but for now with the economic slow down, our assessment is that this is the time to cut down on taxes to not increase taxes at all and to not increase levies.
This is the time that we need to do that and that is what we are trying to do.” “Another example is the reduction in the duties for vehicles that will be related to the mass transit.
Again, no increase in taxes and no increase in VAT”, the minister said. While speaking on the Finance Bill, 2020, the minister said what the government was trying to to do through the finance bill was to make incremental changes to tax laws relating to Customs and Excise as well as other fiscal laws to support the implementation of the annual budget.
The minister explained that when the president presented the 2021 budget to the National Assembly, he directed that the 2020 Finance Bill would also follow to support the budget proposals.
Ahmed said, “we are working on implementing current fiscal reforms in line with the Multi-year Medium Term framework and over time we hope that this Finance Bill, that the fiscal space will be reformed on an incremental basis.
“So this Finance Bill for 2020 was developed as a result of a very large multi-stakeholder effort under Fiscal Policy Reform Committee that has several ministries, departments and agencies as members but also the private sector, experienced tax practitioners and academics.
“During the process, we received a lot of suggestions from different stakeholders but we had to limit what we could take because, we are by three principles – to adopt appropriate counter fiscal measures to manage the economic slow down, incrementally reforming the fiscal incentive policies of government and ensuring closer coordination between the monitary trade as well as fiscal authorities”, she stated.
Speaking on the provisions of the 2020 Finance Bill, Ahmed said the broad principle was to consider how to have adequate macroeconomic strategies to attract investment in order to be able to grow the economy on a sustainable basis.
According to her, the Finance Bill would also ensure job creation as the immediate fiscal strategies to put in place accelerated domestic revenue mobilization in response to COVID-19 pandemic and the recent decline in the economy.
“In producing this bill, what we were inadvertently doing was amending provisions in 13 different taxes which include the Capital Gains Tax Act, Companies Income Tax Act (CITA), Industrial Development (Income Tax Relief ) Act (IIDITRA), Personal Income Tax Act (PITA), Tertiary Education Trust Fund Act, Customs & Excise Tariff (Consolidation) Act, Value Added Tax Act (VATA), Federal Inland Revenue Service (Establishment) Act, the Fiscal Responsibility Act and the Public Procurement Act.
According to her, “some highlights of these provisions include amendments that we have had to make to provide incremental changes to tax laws.
These amendments include providing fiscal relief for corporate tax payers, for instance by reducing the applicable minimum tax rate for two consecutive years. So from 0.5 percent to 0.25 percent.
“These reforms will commence and will also be closely followed by the cessation rules for small businesses as well as providing incentive for mass transits by reducing import duties and the levies for large tractors, buses and other motor vehicles.
The reason for us is to reduce the cost of transportation which is a major driver of inflation especially food production. She further said, “we also have proposed measures to create a legal instrument that supports a crisis intervention fund such as, the crisis intervention that we have had to put in place for COVID-19.
So we hope that we don’t have other crisis but we need to create such a fund so that it is available and it is legislated.”
“We are also amending the Fiscal Responsibility Act to enhance fiscal efficiencies and also to control the cost revenue ratios of government owned enterprises, so that we will be able to realize more operating surpluses from these enterprises.
“Let me remind you that in the 2019 bill, we actually reduced taxes from 30 percent to 20 percent for medium enterprises and from 30 percent to zero percent for very small or macro enterprises.
“These reductions in taxes is being reinforced in the 2020 Finance Bill by further removing the education tax of two percent that the smallest businesses still have to pay despite their zero payment of company income tax”, she added.