Winston Churchill once said that, “a country trying to tax itself into prosperity is like a man standing in a bucket trying to pull himself up by the handle of same bucket”
Today marks barely 1500 days that the world’s economy has been troubled and distorted with the occurrence of the deadly coronavirus, globally code named COVID-19. As of May, 2020, global cases stand at over 4.4 million with very close to 400,000 deaths, and paltry 1.6 million recoveries affecting virtually all the 195 countries of the world critically. The top hit countries are China, Italy and the United States of America with 1,171,63,927 and 46,167 cases recorded respectively.
Aside from the perceived debilitating effects on human existence, there is a multifaceted area that still needs to be considered when determining what forms the sacrosanctity of human survival; and that is its economic activities. No doubt, business activities form the scalar or fulcrum of every thriving economy. According to the International Monetary Fund, IMF boss, he was quoted as saying that the impact of the COVID-19 pandemic is not inconsequential, presumably; therefore, the economy of many African countries would inescapably slip into recession. In this way, Nigeria’s economy is no exception.
From various economic management team to bulky legislations the Nigerian government seem always grappling with holding a balance between growing its economy through increase in fiscal mobilisation on one hand and granting reprieves through various tax incentives to Small and Medium Scale Enterprises, SMEs, with a view to having more robust participants in the sector.
As of today, the survival of many businesses organisations post COVID-19 is dicey and as the major contributors to the economy, the government needs to be proactive to their plight. On the other hand, the government is hell bent on seeing fiscal mobilisation; majorly Indirect Tax i.e. Value Added Tax as the most viable last resort to generate income and stabilise its damaging economy. For example, recent announcement by the Saudi Arabia government of an increase in VAT from 5 percent to 15 percent with effect from 1st July, 2020 to fund revenue deficit arising from COVID-19 impact and fall in oil pricing perfectly fit into the pedestal one economy who position itself on the side increasing VAT with a view to resuscitate dying economy.
As of today, the survival of many businesses organisations post COVID-19 is dicey and as the major contributors to the economy, the government need be proactive to their plight
Records for the past years show that Nigeria’s tax contributions to its GDP is abysmally low at the rate of 5.8 percent, 5.5 percent, 5.1 percent, and 6 percent in 2015, 2016, 2017 and 2018 respectively. In fact, 2019’s contribution which was 4.7 percent, despite all the government’s effort, was abysmally below the previous year’s scale which shows that the tax system and administration in Nigeria is dwindling and gradually driving into the marginal side.
According to National Bureau of Statistic (NBS) report on tax contribution to the nation’s GDP, despite the federal government implemented tax amnesty initiatives from 2016 to 2018 so as to drive up tax revenue and expand its tax base, there was still no level of improvement as tax contribution was still dilly-dallying and at best regarded as a ricocheted economy. It is therefore safe to say that the Finance Act 2020 was necessitated by Nigeria’s tax poor contribution to its GDP; low Value Added tax rate of 5 percent, incommensurate tax incentives which has dwarfed corporate tax base and wide spread tax apathy among others.
Basically, the essence of the Act is to incentivise economic activities so as to stimulate GDP growth and facilitate increase in the revenue generated.
There seems to be certainty that there is uncertainty to the end of this coronavirus pandemic and the time when economic activities will return to normalcy. However, as uncertainty abounds, life changing opportunities are already surfacing out of the blues. Going by world history, each time an economic or health crisis breaks out, the direction and momentum of every facet of the society is palpable, altered and vicariously threatened. From the Black Death in the 1300s, the 90’s Flu, the 2000s SRS Pandemic, down to the 2008 Global Financial crisis, the world’s economy, has been, in one way or the other negatively dampened and altered, thus having a retrogressive impact on the world economic projection.
Legal obligations vs realities of the COVID-19 pandemic
Compliance with statutory obligation, especially as regard to compliance with date is of very essence in law. This to the effect that, where a stipulated date or time is statutorily enshrined for the performance of an act by an individual or corporate organisation, even the government, the consequential effect of non-compliance usually attracts, either a punitive sanction or severe penalties. Under law of taxation, however, penalties are often awarded based on the quantum of money defaulted in multiplier to the number of days defaulted.
Despite the above normative legal practice, the occurrence of the COVID-19 pandemic has severely affected the global economy, and as the microcosm of the larger economy, business units which are contributors to the larger economy is not exempted, to say the least, they are the worst hit. To term with the reality of the day, the government at every level appear confused, due to the fact that it is cut torn between its constitutional role of stabilising the economy and saving it from the cocoon of economic recession on one hand, and alleviating the pang of hardships, dampening the spirit of actors in the private sector, which are key contributors to the nation’s economy.
Summarily, these are the realities that are at stake:
The world economy is negatively altered and nose diving, with international business activities grinding at a halt.
Nations of the world suffer economic crises as a result of the global health challenges created by the COVID-19 pandemic; thus, global recession inescapably looms.
In Nigeria, the Federal Government revenue has drastically collapsed due to a downward slide in the global price of crude oil, which forms 90 percent of the government’s total revenue (IGR) or contributions to the GDP.
With the fact in the 3 above, it is economically wise for a responsive government to diversify its economy by strengthening its GDP through a concerted approach to generate funds via fiscal mobilisation.
Taxation, though comparably less to other contributors, however is no doubt another viable untapped goldmine that can be fallen back on so as to rejig, revamp and stimulate the economy.
In response to the reality poised by the global health challenge, business organisations had been held hostage, with virtually all business organisations forced to work from home, thus causing innumerable loss of revenue to the business firms.
More so, because there is a limit to which individuals can have close contact, thus, it stands to reason to envisage that statutory stipulate time for filing statutory document, Annual Returns, and other compliance documents has been a mirage to comply to, and of course being a unprecedented phenomenon, which has never been prepared for, there is no adequate technological advancement put in place to obviate the physical activities of the participants, hence, infractions to these stipulated was foreseeably unavoidable.
Aside the issue of non-compliance with statutory stipulated time, the naked truth is that corporate organisation earnings or revenue is dangerously affected and the economic reality is that it will take uncertain number of months for 70 percent of business organisations, especially the ones that are Private Limited Liability Company, LTD and Small, Medium Scale Enterprises and Business Name alike o bounce back to business goings due to the downgrading dungeon in which the COVID-19 pandemic has buried them. It is therefore predictable that, statutory meetings most of their financial obligations would practically be impossible until they return to a going concern.
It is in the light of the economic conundrum and confusion that the government weighed its options by prioritising its realities at stake and felt the need to at first devise means to ease the colossal loss and hardship of the business organisations before every other means to resuscitate the economy is devised.