The new finance bill signed into law by President Muhammadu Buhari should excite Nigerians across board, especially low-income earners, the self-employed, micro, small and medium-scale enterprises (MSME).
According to the Buhari Media Organisation (BMO) the Act has five strategic objectives; Promoting fiscal equity by mitigating instances of regressive taxation; Reforming domestic tax laws to align with global best practices; Introducing tax incentives for investments in infrastructure and capital markets; Supporting Micro, Small and Medium-sized businesses, in line with our Ease of Doing Business Reforms; and Raising Revenues for States and Local Governments.
In a statement signed by its Chairman Niyi Akinsiju and Secretary Cassidy Madueke, BMO said that the Act is actually a pro-poor initiative by this administration to tax the rich for the benefit of the masses. “What this Act has done in essence is to exempt items close to the poor from payment of VAT while aggressively piling it up on luxury goods and items consumed by rich and elite.
“The Act has redefined taxing dividend on profit, redress inequity in insurance company taxation, exempt people who earn less because all basic food items such as yam, rice, garri, millet, beans, to mention a few, have been exempted from VAT. While the Elites are shedding crocodile tears on behalf of the poor, the poor are not affected in this matter, for it is the common man who benefits at the end”.
BMO added further that the Finance bill has exempted small businesses with a turnover of less than N25m from Companies Income Tax and Value Added Tax (VAT). It also reduced the company Income Tax rate from 30% to 20% for medium-sized companies with a turnover between N25m and N100m. It also shows the government is empowering tax incentives through the Act, for example, a bonus of 2% of tax payable (medium-sized companies) and 1% for large companies for early payment of Companies income tax.
“Companies with an annual turnover of less than N25m exempted from paying tax represent more than 25 million registered companies in Nigeria. This exemption will lead to more funds available for these companies to reinvest, grow, expand and create more jobs. These are creative ways of enabling businesses, and by extension creating jobs. Finance bill is not about taxing Nigerians.”
The Buhari group added that the finance bill is more largely beneficial to states and local governments than the federal government. The Federal government would receive only 15 percent of VAT, while 50 percent goes to States and 35 percent to local governments.
“Increase in VAT to 7.5 percent will bring more revenue to the purse of 36 States and 774 local government councils to enable them to meet pressing financial needs for infrastructural development. There will be more revenue to finance key government projects especially in the areas of health, education and critical infrastructure in the States. This will also bring additional funds for salary payment in the States.
“Based on this higher revenue accruable to the States and local governments, the citizens have the responsibility to closely monitor the revenue and expenditure of States and local governments to ensure societal development,” the statement added.