The Finance Bill if passed into law will enhance Ease of Doing Business in Nigeria, strengthen micro, small and medium scale enterprises, as well as address the revenue challenge facing the country, writes Obinna Chima
To achieve that, the federal government has to urgently mobilise significant resources to invest in human capital development and critical infrastructure.For instance, the federal government had launched its Strategic Revenue Growth Initiatives , which aims to boost revenue generation. While the focus since the president presented the bill to the lawmakers has been on the proposed hike in Value Added Tax , which some interest groups in the country have continued to kick against, considering the present weak purchasing power, analysts have stressed that the proposed legislation if passed into law and effectively implement could help in addressing some of the fiscal challenges facing the country.
But, The Finance Bill proposes changes to limit the application of the tax only to untaxed profits that are not exempt from tax. “Conversely, on cessation of business, a period of up to 12-month escapes tax. The removal of these rules is considered a welcome development. However, under the proposed legislation, the duties currently performed by the Joint Tax Board as it relates to administering the Personal Income Tax Act, would now be performed by the FIRS.
Generally, an RSLT may involve the exchange of shares between a lender and borrower for short-selling. Furthermore, the Bill introduces a specific benchmark of 30 per cent of earnings before interest, taxes, depreciation and amortisation as the limit for interest deduction on loans by a foreign ‘connected person’.
The CBN recently issued a directive for banks to charge a stamp duty of N50 on point of sale transactions of N1,000 and above. This directive has been viewed by many as retrogressive and contrary to the government’s plan to reduce the proportion of financially excluded adults to 20 per cent by the year 2020.
“The elimination of the restriction of claims and outgoings is positive for the industry as valid business expenses of insurance companies would no longer be disallowed from a tax perspective,” the PwC Nigeria report added.For of the energy and utilities sectors, among a range of other expected reforms, it proposes to delete the need for ministerial approval for tax deductible interest.
The amendments affecting the industry are focused on increasing revenue for government through introduction of WHT on upstream dividends, the deletion of investment tax credit on replacement of obsolete plant and machinery, deemed utilisation of capital allowances for gas companies in pioneer and the elimination of 15 per cent investment allowance. These changes are all focused on increasing government revenue.
The Bill deleted this provision in order to rationalise incentives and due to the ambiguity on what constitutes an “obsolete” plant or machinery, making the incentive redundant in practice.The Finance Bill seeks to introduce across-the-board changes to the various tax laws in Nigeria that would impact on MSMEs and their role in sustainable economic growth. The bill provides certain incentives for businesses. Companies are generally expected to account for VAT based on invoices issued .
“The FIRS may also need to invest in capacity to understand the businesses of taxpayers in this sector in order to determine what services are being provided to Nigerian residents and how to fairly determine the attributable profits,” the report stated.Speaking in an interview on the ‘Morning Show,’ on Arise Television yesterday, a Partner and the Head of Family Wealth at Andersen Tax LP, Mr.
“It seeks to improve compliance and the ease at which businesses are being done. Some of changes as well would increase the sources of funding for the budget,” Onwuka added. “On the issue about compliance, it is a general issue with developing countries. Which is why indirect taxes, such as VAT, have been more effective, in terms of sourcing for government funding.
“However, we expect that government will be transparent and be responsive to the needs of the people to drive compliance,” the former bank chief executive officer said.According to him, the biggest beneficiaries would be the insurance sector.