President Muhammad Buhari on the 14th of October submitted the Finance Bill to accompany the 2020 executive budget proposals and appropriation bill.
It proposes to introduce tax reforms that will help the government achieve its revenue projections for the 2020 budget worth N8.15 trillion.
The bill, which has been passed by the Senate, aims to achieve five major objectives which cut across supporting micro, small & medium-sized businesses (MSMEs) in line with the ease of doing business reforms; reforming domestic tax laws to align with global best practices; introducing tax incentives for investments in infrastructure and capital markets; promoting fiscal equity by mitigating instances of regressive taxation, and raising revenues for government to fund the 2020 budget.
Over the years, business owners, especially under the SME category, have had challenges bordering on multiplicity of taxes. However, the new finance bill has amendments that are expected to correct the anomalies.
The 2019 Finance Bill makes provision for a VAT registration threshold for MSMEs with a turnover of less than N25 million per annum, as well as an incentive of two percent bonus for early tax payment made by medium-sized companies.
Furthermore, the bill allows for the reduction of the corporate tax rate from 30 percent to 20 percent for the MSMEs, especially for companies with a turnover between N25 million to N100 million per annum, while exempting firms with a turnover of less than N25 million annually.
Zainab Ahmed, minister of finance, budget, and national planning, said at a tax strategy forum that the finance bill proposes essential palliatives to support MSMEs and mitigate the impact of the VAT rate increase on the most vulnerable business communities and citizens in the economy.
Yomi Olugbenro, partner and West Africa tax leader, Deloitte, explained at a breakfast meeting that, “Before the revision of the Finance Bill, Nigerian firms were required to pay company income tax on their income. Now, micro and small enterprises are no longer automatically required to pay company income tax, especially small businesses with an annual turnover of N25 million or less.”
An article compiled by Deloitte on Nigeria’s Finance Bill 2019, highlighting the Key changes and implications says, “The proposed Bill is a welcome development in the tax landscape of Nigeria. It proposes provisions that have the capacity to boost the economy by stimulating the growth of small and medium scale enterprises and enticing foreign direct investment into Nigeria.”
Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry (LCCI), in a statement, said that the MSMEs, which constitute a greater part of the business environment, suffers from high tax rates and tax multiplicity which are partly hurting the capacity of these businesses to survive and to achieve their aims and objectives. He urged tax regulators aid MSMEs using concessionary tax rates, tax holidays and other favourable policies that will support their sustainability.