PwC executive roundtable survey shows overwhelming support for Nigeria’s Finance Act 2020

• A new PwC survey showed an overwhelming 92 per cent public support for Nigeria’s Finance Act 2020
• According to a press statement PwC, On the changes to existing laws from the Finance Act, the majority of respondents were most excited about the reduction of minimum tax from 0.5 per cent to 0.25 per cent of turnover
• The survey also revealed that businesses considered technology and tax intelligence as the most efficient for the government to catch tax evaders and raise revenue.
• The transfer of unclaimed dividends and dormant account balances to a Trust fund is the change in the Finance Act that respondents most disagree with.

Leading professional services firm, PwC Nigeria, has held its executive roundtable on the Finance Act 2020 and Economic Outlook for 2021. The virtual event which took place on Monday 1 February 2021 was targeted at CEOs, C-Suite executives and MSMEs and focused on the impact of changes to existing laws by the Finance Act 2020 and other significant government policies, to businesses and taxpayers in Nigeria.

During his welcome remark, Uyi Akpata, Country Senior Partner PwC Nigeria, noted that considering the impact the pandemic was having on Nigeria’s economy, it was important for businesses to understand the forces shaping Nigeria’s economy in 2021. That this knowledge will help them minimise potential risks and take advantage of the fiscal policies the government had enacted to stimulate the recovery of the Nigerian economy.

While delivering the keynote address on the economy and government’s policies towards the recovery, the Honourable Minister of Finance, Budget & National Planning, Mrs. Zainab Shamsuna Ahmed, emphasised the administration is committed to enabling economic recovery and stimulating inclusive growth through policies and interventions designed to foster economic resilience and business sustainability.

Thus, the Finance Act 2020 is aimed at supporting vulnerable households and businesses while improving fiscal discipline and procurement efficiency, enhancing economic competitiveness, encouraging domestic investors and enhancing macroeconomic stability amid the challenges posed by the COVID19 pandemic.

On his part, Andrew S. Nevin (Ph.D.), Partner and Chief Economist PwC Nigeria noted 10 themes that policymakers and businesses need to consider in 2021. Nigeria must as a priority find its development path. Achieving this will include finding innovative ways to act on the following:

• Unlocking Nigeria’s vast dead assets to stimulate growth
• Harnessing the Power of the Diaspora
• Driving export growth through services
• The need for growth to be spread across the country, and not just in a few urban centres
• Improving on the country’s low investment and gross capital formation
• Moving its thriving informal sector to the formal sector
• Improving on the business environment, and ease of doing business
• Addressing Nigeria’s big 3 distortions (exchange rate, power, and subsidies)
• Shifting its focus from the Gross Domestic Product (GDP) lens to Sustainable Development Goals
• And finally, prioritising climate change

Nigeria holds as much as US$900 billion worth of dead capital in residential real estate and agricultural land. The value of the Federal Government’s abandoned properties alone, according to the Nigerian Institute of Builders, is projected to be about N230 billion. And about a half of Nigeria’s population live in cities, of which almost 80% of them are living in substandard conditions. Finding the political will to act and unlock Nigeria’s dead real estate assets will have a transformative impact on the lives of Nigerians.

Out of the 10 themes, another important theme to consider was Nigeria’s Gross Fixed Capital Formation, which in 2019, stood at less than 20%. And PwC estimates that Nigeria would need an investment rate of at least 26% – 28% of GDP to achieve 7% growth.

Nigeria’s economy, the Chief Economist further noted, is distorted by the exchange rate; fuel subsidy regime; and the power sector. Addressing these three big distortions will be taking the giant step to restructure the country’s economy holistically; achieve the 7% GDP growth, and improve the lives of the average Nigerian.

Taiwo Oyedele, Fiscal Policy Partner and West Africa Tax Leader PwC Nigeria, who shared insights on how the Finance Act 2020, and other significant changes that have been made to existing laws, will shape Nigeria’s tax environment in 2021 noted that there were no easy choices or a silver bullet given the limited fiscal space for incentives and to deliver on counter-cyclical measures. He commended the policy direction of the government not to introduce new taxes or increase the rate of existing taxes. While commending the government for the reduction in minimum tax rate, he advocated for a permanent removal of the tax which often tax companies that are vulnerable especially when they are loss making.

Providing the results of the survey conducted by PwC, Taiwo Oyedele revealed that respondents were also asked to indicate which changes in the Act they did not agree with. Over half (59.7%) said they did not agree with the idea of transferring unclaimed dividends and dormant account balances to a Trust Fund. 31.2% do not agree with the plan to introduce excise duty on Telecommunications services followed closely by 30.3% who do not agree with the deployment of Technology by FIRS to plug into taxpayers systems.

Respondents were also asked to indicate which 3 initiatives they would support the government, to fund the budget deficit and cater for the various tax reliefs.  67.8% voted for the use of technology to catch tax evaders and aggressive tax avoiders. This appears to be in contrast with the small but significant percentage of respondents who do not want technology deployed into taxpayers systems. 62.2% of respondents will support public procurement efficiency and fiscal responsibility by Ministries, Departments and Agencies of government while 46.3% of respondents said they would support the taxation of foreign companies under the Significant Economic Presence and new VAT rules.

Although only 36.9% of respondents agree that the Act addresses their business challenges, an overwhelming majority (92.2%) support the Finance Act 2020.

Other speakers at the Roundtable were Mr Sam Nwanze, CFO Heirs Oil & Gas and Mrs Amal Hassan, Founder and CEO,Outsource Global Technologies who gave their perspectives on the Act and the implications for large corporates and SMEs respectively.