President Muhammadu Buhari has signed the Finance Bill into law. The bill, which introduces significant changes to Nigeria’s tax rates and collections, should now come into effect across the sectors which it targets.
The president announced the signing of the bill on Monday, via his Twitter handle. According to him, it was the first time since 1999 that a finance bill had been introduced alongside an appropriation bill (for a budget) to ensure the effective implementation of the country’s national budget.
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Talk of legally-backed reforms to the country’s public tax regimes had gone on for much of 2019. Although the 2020 Finance Bill was introduced to the National Assembly alongside the 2020 National Budget, the latter was signed into law on December 17, a month before.
Some of the notable changes proposed by the Finance Bill include an upward revision of the Value Added Tax (VAT) rate to 7.5%, up from 5%; the exemption of smaller businesses from paying Company Income Tax (CIT); and the requirement that individuals have a Tax Identification Number (TIN) in order to open and operate bank accounts in Nigeria.
Other rule changes are a 2% tax bonus for early payment of Company Income Tax, the increase in the threshold for charges on electronic transactions from ₦1,000 to ₦10,000; and the extension of excise duties to imported goods.
In his statement, President Buhari explained that the new rules were brought in to support MSMEs in line with its Ease of Doing Business reforms, make investments in infrastructure and capital projects more attractive to the corporate sector, and raise government revenues.
Recall that the Finance Bill was passed by the Senate on November 21. The bill had been put together following wide consultations with stakeholders in the country’s business sector.
The idea of an increase in VAT had been mentioned by finance and tax authorities at various points over the past year. The FIRS has been on a campaign to shore up public coffers through a more effective tax collection.
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The new law contains apparent attempts to soften the impact of the rate hikes introduced by tax authorities. For instance, businesses with an annual turnover of less than ₦25 million are not required to pay the Value Added Tax (VAT). They will also be exempt from paying Company Income Tax (CIT).
Analysts will now want to know whether these rule changes eventually help to increase government revenues, and how it affects Nigerians across the board.
Featured image source: Nairametrics
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