Speaking at an interactive session organised by the Professional Practice Group of the Lagos Chamber of Commerce and Industry (LCCI) in Lagos, Ajibola Olomola, partner, Tax, Regulatory and People Services, said Nigeria needed a bullet-proof tax system to boost its gross domestic product and cut the unemployment rate of 23.1 percent.
He said Nigeria’s tax to GDP of 6 percent (2018) was one of the lowest globally, as the ratio across African countries hovered between 12 and 17 percent.
“Tax and non-tax revenue of N2.18 trillion are insufficient to close the projected 2020 budget deficit,” he said.
Africa’s largest economy has been troubled by multiple taxations. Tax collection has been marred by uncertainties, inconvenience and lack of economy – in contradistinction to key canons of tax proposed by Adam Smith, a Scottish economist.
The Federal Government, in the realisation of the weaknesses, recently sponsored a Finance Bill, which has been assented to by President Muhammadu Buhari.
The now Finance Act has an early tax payment bonus and eliminates potential double taxation with the new Excess Dividend tax rules, Olomola said.
Apart from the simplification of Minimum Tax Rules, there is a five-to-eight-year tax holiday for agricultural business, including a change in conditions for tax-exempt export profits.
“The proposed changes in Finance Act will ensure that dividends that had been subject to tax are not subjected to CIT upon re-distribution to shareholders,” he explained.
The Finance Act favours micro, small and medium businesses as firms with less than N25 million turnover will no longer pay taxes while those that have a turnover of between N25 million and N100 million yearly will pay 20 percent as companies income tax.
Olomola, however, said the Federal Inland Revenue Service (FIRS) would need to clarify issues around the Value Added Tax (VAT) compliance framework for MSMEs.
He advised the business community to reassess existing tax strategy framework to prevent undue tax exposures, saying, “Check for relevance and accuracy in tax assessment notices received from tax authorities.”
David Ogedengbe, head of the FIRS in Lagos, said four reasons for the Finance Act were to encourage fiscal equity, MSMEs, ease of doing business and raise revenue for the government.
He said with the Finance Bill, insurance firms would now carry forward their losses indefinitely.
For the VAT, he said the Act provided that a person who failed to notify the FIRS of change of address within 30 days or who failed to comply with the requirement for notification of permanent cessation of trade of business would pay N50,000 for the first month and N25,000 for the subsequent month as against N5,000 provision in the earlier Act.