The proposed 2020 Finance Acts will amongst other things establish legal backing for the proposed measures to supports a crisis intervention fund, according to the Minister of Finance, Budget and National Planning, Zainab Ahmed.
Zainab also doused fears that government plans to increase tax, saying that the Bill has no plans for tax increases.
Government new policy which was approved by the Federal Executive Council FEC on Wednesday, is aimed at addressing the crisis that followed the absence of a well articulated, legally established intervention funds to tackle the coronavirus pandemic that caught global economy unawares.
Zainab Ahmed while briefing the State House Correspondents after the virtual Federal Executive Council FEC meeting presided over by President Muhammadu Buhari, on Wednesday,
said ” We 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”
President Buhari had earlier stated that the 2020 Finance Bill will follow to support the the 2021 budget proposals presented to the National Assembly.
Highlights of other provisions in the Act which was approved for presentation to the National Assembly include, amendments to provide for incremental changes to tax laws.
The new amendment provide for 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.
The Minister revealed that the 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.
“through this finance bill, what we are seeking to do is to make incremental changes to tax laws relating to Customs and Excise as well as other fiscal laws to support the implementation of annual budget.
Federal government announced that the Fiscal Responsibility Act was being amended to enhance fiscal efficiencies and also to control the cost revenue ratios of government owned enterprises.
The Minister said government hopes to realize more operating surpluses from its 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.
“There are a lot of provisions in this bill, we will be publishing the summary of the draft bill on our various websites the moment Mr. President conveys the bill to the parliament so that we get inputs from the citizens as the parliament undertake its own review processes.
The Minister stated that government is working on implementing current fiscal reforms in line with the Multi-year Medium Term framework and over time,, adding that ” we hope that this Finance Bills, that the fiscal space will be reformed on an incremental basis”
She announced that the 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 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.
“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.
She announced that government is inadvertently 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.
“In the last Finance Bill 2019,we reduced taxes from 30 percent to 20 percent for enterprises that have turnover of between twenty five million Naira to one hundred million Naira. We also moved taxes from 30 percent to zero percent for enterprises that have turnover of twenty five million Naira and bellow which means they pay no taxes.
What we are doing in the Finance Bill 2020 is to further renew the Education tax of two percent for that lower category of enterprises that have turnover of twenty five million Naira and bellow.
“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”
