The Federal Executive Council (FEC) has approved the Finance Bill 2020 designed to engender incremental changes in the nation’s tax laws and support the 2021 fiscal year.
The bill which was approved FEC meeting presided over by President Muhammadu Buhari at the presidential villa, Abuja on Wednesday will now be transmitted to the National Assembly for its consideration and passage into law.
Briefing correspondents on the matter after the meeting, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, assured that the passage of the bill into law will not lead to increase in taxes in the country.
She explained that the bill was to ensure improvements in the tax laws while also reducing some taxes, especially for small and medium enterprises, even as she said some taxes had already been reduced saying.
According to her: “In the last Finance Bill 2019, we reduced taxes from 30 per cent to 20 per cent for enterprises that have a turnover of between N25 to N100 million.”
Ahmed assured that the situation in the country does not warrant an increase in taxes, saying: “This is not the time to increase taxes. “
She said through the Finance Bill, the government is seeking to make incremental changes to tax laws relating to Customs and Excise as well as other fiscal laws to support the implementation of an annual budget.
She added: “We are working on implementing current fiscal reforms in line with the Multi-year Medium Term framework and over time, we hope that with this Finance Bill, that the fiscal space will be reformed on an incremental basis.
“So, this Finance Bills 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 guided by three principles – to adopt appropriate counter fiscal measures to manage the economic slowdown, incrementally reforming the fiscal incentive policies of the government and ensuring closer coordination between the monetary trade as well as fiscal authorities.
“A few of the provisions of the 2020 Finance Bills: the broad principle is to consider how we will have adequate macroeconomic strategies to attract investment, to be able to grow the economy on a sustainable basis but also to create jobs as the immediate fiscal strategies to put in place accelerate 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 (IDITRA), Personal Income Tax Act (PITA), Tertiary Education Trust Fund Act, Customs & Excise Tariff (Consolidation) Act, Value Added Tax Act (VAT), Federal Inland Revenue Service (Establishment) Act, the Fiscal Responsibility Act and the Public Procurement Act.
“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 taxpayers, for instance by reducing the applicable minimum tax rate for two consecutive years from 0.5 per cent to 0.25 per cent.
“These reforms will commence and will also be closely followed by the cessation rules for small businesses as well as providing an 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.
“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.”
The minister recalled that the 2019 bill reduced taxes from 30 per cent to 20 per cent for medium enterprises and from 30 per cent to zero per cent for very small or macro enterprises.
These reductions in taxes are being reinforced in the 2020 Finance Bill by further removing the education tax of two per cent that the smallest businesses still have to pay despite their zero payment of company income tax,” she stated.