• Tuesday, July 23, 2024
businessday logo

BusinessDay

The far side of the 2020 finance act

The Federal Government, in December 2020, signed what is now the 2020 Finance Act. Apparently, the Act aims to enhance the chances of the 2020 Budget to attain its objectives, particularly on revenue mobilization. The Act went all out to reflect the anger with which government would deal with lack of money or whatever demon that represents it, if found on the streets of Abuja and Lagos.

Accordingly, the Act was bullish in amending several provisions of Nigerian tax laws that are suspected to hinder revenue collection. These include the Value Added Tax Act (VAT Act), the Companies Income Tax Act (CITA), the Petroleum Profits Tax Act (PPTA), the Capital Gains Tax Act (CGTA), the Stamp Duties Act (SDA) and even the Customs, Excise Tariff, Etc. (Consolidation) Act. The government also went with full force against anyone that would stop it from accessing unclaimed dividends, which it now wants to borrow from Nigerians, dead and alive.

Government insists that the objective of the Act is to provide relief to Nigerians and their companies; two entities that have suffered tremendous hardship and irreversible damage. Largely because of the pandemic but also as a result of the failure of government to deal decisively with the problem of insecurity, which has become a defining characteristic of Nigeria today.

Read Also: NIMASA partners Amnesty Office to curb maritime crimes on Nigerian waters

The document is highly legal and only learned people may run through it with ease. This may further complicate the difficulty that will ordinarily assail most Nigerians that may want to see for themselves, those provisions that are said to be intended to make their lives more bearable. My advice is that they drop such ambition and just leave it God to whom most things in Nigeria are left. This is not to say that there is nothing in there for the ordinary Nigerian. Far from it, there are some provisions in the PITA that could bring some warmth to those thrown into the cold by the combined effect of a failed security system and global economic downturn. At least there is a tax you must pay to show that you are still alive.

This hurry to tap the revenue sources seems to have informed some provisions that have effectively reversed certain progressive policies already under implementation

The president said it was introduced alongside the 2020 budget, to reform Nigeria’s tax laws to align with global best practices and support MSMEs in line with our Ease of Doing Business Reforms, incentivize investments in infrastructure and capital markets and raise government revenues. From this we can see that its largely about government revenues, which have fallen to crisis level lately. This hurry to tap the revenue sources seems to have informed some provisions that have effectively reversed certain progressive policies already under implementation, including the seven-year-old National Automotive Industry Development Plan (Automotive Policy).

Although the industry had wobbled expectedly, there has been considerable positive responses to the call to invest in the Automotive Industry. This is what Fitch Solutions Country Risk and Industry Research said about the Nigerian Automotive Industry: “We believe that the signing of the National Automotive Industry Development Plan bill into law will considerably boost Nigeria’s underutilized domestic vehicle production capacity.

Our 2019 vehicle production growth forecast for Nigeria remains one of the highest not only in the region but also globally at 21% compared to the global average of 1.5% over the same period. Vehicle manufacturers are already making a move back into Nigeria as the automotive policy is in its last stages to get signed into law and the significant rewards offered by the Nigerian market”. Truly, many manufacturers came in and existing ones increased capacity with new investments.

All that has now gone with the wind as some of the core incentives provided by the Automotive Policy have been reversed in a patently Nigerian-style policy reversal. According to the Finance Minister the 2020 Finance Act is to give fiscal relief to transporters to enhance mass transit as the rising food inflation in the country had been traced to the high cost of transportation (not the inability of farmers to go to farm because their farms have become death traps due to banditry and terrorism).

In addition, she lamented that the fourteen local auto manufacturers are not producing enough; doing only about 50,000 units instead of the 750,000 the market demands. Accordingly, instead of finding ways to help them boost capacity, starting with government off-taking part of what they produce, the duty on imported vehicles has been reduced to pittance. This brings their ambition of local production to a screeching halt. She said the Policy is two years overdue for review and has not yielded expected results, so the blame is on the manufacturers; not those who were supposed to review it and make adjustments but failed.