President Bola Tinubu has put the brakes on the implementation of some of the tax changes made by his predecessor, providing temporary reprieve to businesses and households groaning under the weight of new charges aimed at propping up government revenue.
Tinubu signed on Thursday four Executive Orders, postponing the enforcement of taxes on telecommunication services and alcoholic beverages and suspending the green tax, including the single use plastics tax and the import adjustment levy on certain categories of vehicles.
The Finance Act (Effective Date Variation) Order, 2023 defers the commencement date of the changes contained in the Act from May 28, 2023, to September 1, 2023.
“This is to ensure adherence to the 90 days minimum advance notice for tax changes as contained in the 2017 National Tax Policy,” Dele Alake, special adviser to the President on special duties, communication and strategy, said while briefing State House journalists.
The Customs, Excise Tariff (Variation) Amendment Order, 2023, shifts the commencement date of the tax changes from March 27, 2023 to August 1, 2023 and also in line with the National Tax Policy.
Another Executive Order suspended the 5 percent excise tax on telecommunication services as well as the excise duties escalation on locally manufactured products.
Alake said the President ordered the suspension of the newly introduced Green Tax by way of excise tax on single use plastics, including plastic containers and bottles, as well as the import tax adjustment levy on certain vehicles.
“As a listening leader, the President issued these orders to ameliorate the negative impacts of the tax adjustments on businesses and chokehold on households across affected sectors,” he said, adding that Tinubu would not exacerbate the plight of Nigerians.
The latest action of the President, according to Alake, is part of efforts to address key concerns raised earlier by manufacturers and other stakeholders regarding recent tax changes introduced by former President Muhammadu Buhari.
He said: “Upon taking over the reins of government, the President promised to run a government that will not make life difficult for Nigerians or asphyxiate corporate entities in spite of the challenges The Federal Government is irrevocably committed to this pledge”
“Tinubu Administration has since noticed that some of the tax policies are being implemented retroactively with their commencement dates, in some instances, pre-dating the official publication of the relevant legal instruments backing the policies. This lacuna has created some challenges of implementation.”
He said while the intentions behind the upward adjustments of some of these taxes “are quite noble because they were designed to raise revenue as well as address environmental and health issues of concern”, they had generated some significant challenges for, and elicited serious complaints among key stakeholders as well as in the business community.
Many of the affected businesses are already contending with the rising costs, falling margins and capacity underutilisation due the various macroeconomic headwinds as well as the impact of the naira redesign policy, according to Alake.
He said: “The excise tax of 5 percent on telecommunication services has generated heated controversy. There is also a lack of clarity regarding the status of this tax, just as players in the sector also complain about the imposition of multiple taxes on their operations.
“We have also seen that the Green Taxes, including the Single Use Plastics tax and the Import Adjustment Levy on certain categories of vehicles require more consultation and a holistic approach to the country’s net zero plan in a manner that does not impact the economy negatively.”
Alake said the government would continue to give requisite stimulus by way of friendly policies to allow businesses to flourish in the country.
“President Bola Tinubu wishes to assure Nigerians by whose mandate he is in power that there will not be further tax raise without robust and wide consultations undertaken within the context of a coherent fiscal policy framework,” he added.
Suspension of taxes seen easing manufactures’ burden
The suspension of excise duty rates (taxes) on alcoholic beverages and tobacco products will ease the burden on manufacturers, according to experts.
Excise duties are indirect levies placed on the manufacture of locally produced goods. Countries usually implement them to discourage the purchase of goods that may harm consumers or the environment and also serve as a source of additional revenue to the government.
“Manufacturers will rejoice because those taxes were really unfair on them. Over the years, they have been galloping with all manner of problems coupled with the recent removal of fuel subsidy and the exchange rate unification,” Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise, said.
Overall, these moves will facilitate a business friendly environment and signal a responsive tax policy direction for the country going forward, said Taiwo Oyedele, West Africa tax leader at PwC Nigeria.
“The recently signed executive order is a good development and most needed relief for businesses and households by addressing some of the most pressing concerns regarding recently introduced taxes including excise tax on telecommunication services, the green tax on single use plastics and escalation of excise duties on tobacco and alcoholic beverages which have all been suspended,” he said.
He added that deferring the commencement date of the Finance Act 2023 is in line with global best practice as prescribed by the 2017 National Tax Policy.
According to the 2023 Fiscal Policy Measures document signed in March by Zainab Ahmed, the former minister of finance, budget and national planning, the taxes to be paid by alcoholic beverage firms starting from June more than doubled.
Total specific rate for beer and stout, wines, spirits (per litre) was N300, a 114.3 percent growth from N140 last year. Tobacco’s specific rate was N8.20 per stick, 95.3 percent increase from N4.2 per stick in 2022.
It was also 76.4 percent higher than the rates they were meant to pay this year before the review and 32.5 percent (N408.2) higher in 2024.
The total ad-valorem rate levied on alcoholic beverages and tobacco products rose by 40 percentage points to 110 percent in June from 70 percent in the same period of last year. The total ad-valorem rate for next year still stands at 110 percent.
Before the taxes were updated, the total ad-valorem rate was previously set to be 70 percent effective in June.
Gabriel Idahosa, deputy president of Lagos Chamber of Commerce and Industry, had said in April that the tax increases would reduce the volumes of alcohol and tobacco products “since they are not matters of absolute necessities for consumers”.
“We should also expect slimmer profits margins for the companies and returns to investments for shareholders are likely to reduce,” he told BusinessDay.
He said for smaller products or companies in the brewery industry, the combination of reduced consumption and lower profit margins may knock them out of business or struggle to survive, which could eventually lead to job losses.
“Ultimately, it will affect the supply chain from the people who supply the raw materials to those involved in the transportation and distribution of the products in the country, further causing a decline to the Gross Domestic Product,” he said.
Employers excited, say operating costs will drop
The Nigerian Employers’ Consultative Association (NECA) described the development as a relief for overburdened businesses.
Adewale-Smatt Oyerinde, director-general of NECA, who commended the president’s intervention, decried that “the issue of multiplicity of taxes has become a major challenge to organised businesses in the country”.
He said: “Currently businesses are made to pay over 50 different taxes and sundry charges, among which are: corporate income tax, import duties, export duties, excise duties, rents, capital gains tax, personal income tax, value added tax, stamp duties, property tax, licences, motor parking fee, motor vehicle fee, withholding tax, land tax, market licence fee, road tax, business premises, dividend tax, NHIS levy, advert fee, regulation fees, the new NYSC levy as well as the regular user charges such as electricity, water, disposal fee, etc.
“This huge tax burden, no doubt, has been a clog in the wheel of the overall performance of organised businesses over the years. We had at numerous fora expressed concern on the escalation of taxes, including exercise duties and its adverse implication on the business operating environment.”
He said the new Orders would support the efforts at improving the operating environment and mitigate the high cost of doing business in Nigeria, particularly with the aftermath of the removal of fuel subsidy.
Freight forwarders, telecom operators speak
The suspension of the controversial Import Adjustment Tax (IAT) is supposed to be good news for car dealers because it ought to have translated into a reduction in the prices of cars, said Tony Anakebe, a Lagos-based Licensed Customs, who deals on the clearing of vehicles and containers.
According to him, the expected gains of the new policy that suspends the IAT have been defeated by the high exchange rate for importing cars and for clearing them at ports.
“Customs has started implementing the floating foreign exchange rate regime in line with the central bank directive which means that the exchange rate for clearing at port will be adjusted according to the naira rate. Today, it is N770.88/$, it will naturally keep going up at least for now and importers will be paying more as duties,” he said.
Former President Buhari had, on April 20, 2023, introduced a new set of taxes on some vehicles imported into the country.
Under that tax regime, which was to come into effect on June 1, 2023, imported vehicles with 2,000cc (2 litres) to 3,999cc (3.9 litres) engines will pay an additional charge known as Import Adjustment Tax (IAT) levy of 2 percent of the value of the vehicle while vehicles with 4,000cc (4 litres) and above engines will attract Import Adjustment Tax of 4 percent of their value.
The new levy was to be paid in addition to the 35 percent import duty and 35 percent levy being paid by importers of vehicles. This was supposed to bring the total import duties to 72 percent for 2 to 3.9-litre engines and 74 percent for vehicles with 4-litre engines.
However, vehicles below 2,000cc including mass transit buses, electric vehicles, and locally manufactured vehicles are exempted from paying the IAT levy.
Tony Izuagbe, president of the Association of Telecommunications Operators of Nigeria, described the decision to suspend the 5 percent excise tax as a welcome development.
He said it was an important step towards eradicating the multiple taxation facing operators.
Ali Isa Pantami, former minister of communications and digital economy, had said the telecom industry was exempted from the excise tax as part of efforts of the Buhari administration to encourage growth in the industry. However, the industry was included in a revised version of the 2023 Fiscal Policy Measures, with the minister advising operators to ignore the revised version.
However, Izugbe said the industry operators needed more assurance from the President that it had been exempted and when it did not come, there were worries the excise tax would be implemented. The new executive order finally put the concerns to rest.
On Thu, Jul 6, 2023, 6:46 PM Temi Bamgbose <[email protected]> wrote:
Tinubu eases throttle on taxes
· Charges on vehicles, beers, phone calls on hold
By Tony Ailemen, Bunmi Bailey, Amaka Anagor-Ewuzie and Frank Eleanya
President Bola Tinubu has put the brakes on the implementation of some of the tax changes made by his predecessor, providing temporary reprieve to businesses and households groaning under the weight of the…
Tinubu signed on Thursday four Executive Orders, postponing the enforcement of taxes on telecommunication services and alcoholic beverages and suspending the green tax, including the single use plastics tax and the import adjustment levy on certain categories of vehicles.
The Finance Act (Effective Date Variation) Order, 2023 defers the commencement date of the changes contained in the Act from May 28, 2023, to September 1, 2023.
“This is to ensure adherence to the 90 days minimum advance notice for tax changes as contained in the 2017 National Tax Policy,” Dele Alake, special adviser to the President on special duties, communication and strategy, said while briefing State House journalists.
The Customs, Excise Tariff (Variation) Amendment Order, 2023, shifts the commencement date of the tax changes from March 27, 2023 to August 1, 2023 and also in line with the National Tax Policy.
Another Executive Order suspended the 5 percent excise tax on telecommunication services as well as the excise duties escalation on locally manufactured products.
Alake said the President ordered the suspension of the newly introduced Green Tax by way of excise tax on single use plastics, including plastic containers and bottles, as well as the import tax adjustment levy on certain vehicles.
“As a listening leader, the President issued these orders to ameliorate the negative impacts of the tax adjustments on businesses and chokehold on households across affected sectors,” he said, adding that Tinubu would not exacerbate the plight of Nigerians.
The latest action of the President, according to Alake, is part of efforts to address key concerns raised earlier by manufacturers and other stakeholders regarding recent tax changes introduced by former President Muhammadu Buhari.
He said: “Upon taking over the reins of government, the President promised to run a government that will not make life difficult for Nigerians or asphyxiate corporate entities in spite of the challenges The Federal Government is irrevocably committed to this pledge”
“Tinubu Administration has since noticed that some of the tax policies are being implemented retroactively with their commencement dates, in some instances, pre-dating the official publication of the relevant legal instruments backing the policies. This lacuna has created some challenges of implementation.”
He said while the intentions behind the upward adjustments of some of these taxes “are quite noble because they were designed to raise revenue as well as address environmental and health issues of concern”, they had generated some significant challenges for, and elicited serious complaints among key stakeholders as well as in the business community.
Many of the affected businesses are already contending with the rising costs, falling margins and capacity underutilisation due the various macroeconomic headwinds as well as the impact of the naira redesign policy, according to Alake.
He said: “The excise tax of 5 percent on telecommunication services has generated heated controversy. There is also a lack of clarity regarding the status of this tax, just as players in the sector also complain about the imposition of multiple taxes on their operations.
“We have also seen that the Green Taxes, including the Single Use Plastics tax and the Import Adjustment Levy on certain categories of vehicles require more consultation and a holistic approach to the country’s net zero plan in a manner that does not impact the economy negatively.”
Alake said the government would continue to give requisite stimulus by way of friendly policies to allow businesses to flourish in the country.
“President Bola Tinubu wishes to assure Nigerians by whose mandate he is in power that there will not be further tax raise without robust and wide consultations undertaken within the context of a coherent fiscal policy framework,” he added.
Suspension of taxes seen easing manufactures’ burden
The suspension of excise duty rates (taxes) on alcoholic beverages and tobacco products will ease the burden on manufacturers, according to experts.
Excise duties are indirect levies placed on the manufacture of locally produced goods. Countries usually implement them to discourage the purchase of goods that may harm consumers or the environment and also serve as a source of additional revenue to the government.
“Manufacturers will rejoice because those taxes were really unfair on them. Over the years, they have been galloping with all manner of problems coupled with the recent removal of fuel subsidy and the exchange rate unification,” Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise, said.
Overall, these moves will facilitate a business friendly environment and signal a responsive tax policy direction for the country going forward, said Taiwo Oyedele, West Africa tax leader at PwC Nigeria.
“The recently signed executive order is a good development and most needed relief for businesses and households by addressing some of the most pressing concerns regarding recently introduced taxes including excise tax on telecommunication services, the green tax on single use plastics and escalation of excise duties on tobacco and alcoholic beverages which have all been suspended,” he said.
He added that deferring the commencement date of the Finance Act 2023 is in line with global best practice as prescribed by the 2017 National Tax Policy.
According to the 2023 Fiscal Policy Measures document signed in March by Zainab Ahmed, the former minister of finance, budget and national planning, the taxes to be paid by alcoholic beverage firms starting from June more than doubled.
Total specific rate for beer and stout, wines, spirits (per litre) was N300, a 114.3 percent growth from N140 last year. Tobacco’s specific rate was N8.20 per stick, 95.3 percent increase from N4.2 per stick in 2022.
It was also 76.4 percent higher than the rates they were meant to pay this year before the review and 32.5 percent (N408.2) higher in 2024.
The total ad-valorem rate levied on alcoholic beverages and tobacco products rose by 40 percentage points to 110 percent in June from 70 percent in the same period of last year. The total ad-valorem rate for next year still stands at 110 percent.
Before the taxes were updated, the total ad-valorem rate was previously set to be 70 percent effective in June.
Gabriel Idahosa, deputy president of Lagos Chamber of Commerce and Industry, had said in April that the tax increases would reduce the volumes of alcohol and tobacco products “since they are not matters of absolute necessities for consumers”.
“We should also expect slimmer profits margins for the companies and returns to investments for shareholders are likely to reduce,” he told BusinessDay.
He said for smaller products or companies in the brewery industry, the combination of reduced consumption and lower profit margins may knock them out of business or struggle to survive, which could eventually lead to job losses.
“Ultimately, it will affect the supply chain from the people who supply the raw materials to those involved in the transportation and distribution of the products in the country, further causing a decline to the Gross Domestic Product,” he said.
Freight forwarders, telecom operators speak
The suspension of the controversial Import Adjustment Tax (IAT) is supposed to be good news for car dealers because it ought to have translated into a reduction in the prices of cars, said Tony Anakebe, a Lagos-based Licensed Customs, who deals on the clearing of vehicles and containers.
According to him, the expected gains of the new policy that suspends the IAT have been defeated by the high exchange rate for importing cars and for clearing them at ports.
“Customs has started implementing the floating foreign exchange rate regime in line with the central bank directive which means that the exchange rate for clearing at port will be adjusted according to the naira rate. Today, it is N770.88/$, it will naturally keep going up at least for now and importers will be paying more as duties,” he said.
Former President Buhari had, on April 20, 2023, introduced a new set of taxes on some vehicles imported into the country.
Under that tax regime, which was to come into effect on June 1, 2023, imported vehicles with 2,000cc (2 litres) to 3,999cc (3.9 litres) engines will pay an additional charge known as Import Adjustment Tax (IAT) levy of 2 percent of the value of the vehicle while vehicles with 4,000cc (4 litres) and above engines will attract Import Adjustment Tax of 4 percent of their value.
The new levy was to be paid in addition to the 35 percent import duty and 35 percent levy being paid by importers of vehicles. This was supposed to bring the total import duties to 72 percent for 2 to 3.9-litre engines and 74 percent for vehicles with 4-litre engines.
However, vehicles below 2,000cc including mass transit buses, electric vehicles, and locally manufactured vehicles are exempted from paying the IAT levy.
Tony Izuagbe, president of the Association of Telecommunications Operators of Nigeria, described the decision to suspend the 5 percent excise tax as a welcome development.
He said it was an important step towards eradicating the multiple taxation facing operators.
Ali Isa Pantami, former minister of communications and digital economy, had said the telecom industry was exempted from the excise tax as part of efforts of the Buhari administration to encourage growth in the industry. However, the industry was included in a revised version of the 2023 Fiscal Policy Measures, with the minister advising operators to ignore the revised version.
However, Izugbe said the industry operators needed more assurance from the President that it had been exempted and when it did not come, there were worries the excise tax would be implemented. The new executive order finally put the concerns to rest.
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