ALTHOUGH the Presidential Fiscal Policy and Tax Reforms Committee led by Mr Taiwo Oyedele, has made bold and audacious recommendations to transform the Nigerian business environment and economic landscape, a financial analyst and educator, Kalu Aja, has frowned at the delay in the whole process, saying that Nigerians are eagerly waiting, and that the delay has given room to a lot of misconceptions.
While a herd of other analysts had equally argued that the Committee’s recommendations should not be given the Oronsanya’s report treatment, and never to be jettisoned or delayed any further, the general consensus is that if implemented, these recommendations will have far-reaching positive economic implications.
Speaking at Proshare’s online “The Economists’ Conference,” monitored in Lagos, on Friday, Aja stated: “We have a committee headed by Mr. Taiwo. Essentially, what’s going on is that the government wants to streamline, make taxes simple. That’s the simple way to put it, make taxes simple, make collections simple, and also to increase the tax weapons at the Federal government of Nigeria’s end. The problem is, it’s taking just too long to get the committee to bring out a proposal to Nigerians.
“Hence, in this vacuum, we see lots of press releases. There’s going to be a 10 percent hike in this and there’s going to be less taxes, but we’re not sure what is going to come out of that committee. So it’s difficult to then say if we support it, or how that’s going to pan out into these windfall taxes.
“So the first thing is that speed, is of the essence. When will you bring up the tax policy? A poor country like Nigeria is going through change.”
The committee seeks to reduce revenue-collecting agencies to one; reduce the number of taxes to a single-digit; adjust the structure of the Federal Government’s annual budget; amend the 2024 Withholding Tax Regulations; recommend broad-based Priority Sector Incentives over the “Pioneer Tax Incentive Scheme” in the country; 5 percent reduction in Company Income Tax, among others.
Mr. Oyedele in response to certain reports in the media recently took to his X handle to explain that the committee’s proposal for Value Added Tax (VAT) is to reduce the rate to zero percent (0%) for food, health, education, and exemption for rent, transportation, and small businesses.
According to him, “My committee’s proposal for VAT is to reduce the rate to zero percent (0%) for food, health, education, and exemption for rent, transportation, and small businesses. Our data shows that these are the areas where the average person spends almost all their income, meaning their VAT burden will reduce.
“The upward rate adjustment is on other items to partly offset the reduction in rate and exemption for basic consumptions ensuring that the masses are protected.”
Speaking on Withholding tax, the tax expert gave a background information stressing that Withholding tax was introduced into the Nigeria tax system in 1977 to serve as an advance payment of income tax on specified transactions.
It was designed to provide the government with regular revenue flow and to serve as a means of curbing tax evasion.
But as the regime expanded over time to cover more transactions, various ambiguities and complications crept in. This resulted in many businesses, especially SMEs, being exposed to excessive burden of compliance and a strain on the working capital of low-margin businesses.
“As part of the ongoing fiscal policy and tax reforms, a new withholding tax regime has been approved. The key changes introduced are to address the identified challenges and specifically include: Exemption of small businesses from Withholding Tax compliance;Reduced rates for businesses with low margins; Exemptions for manufacturers and producers such as farmers; introduce measures to curb evasion and minimise tax avoidance; ease of obtaining credit and utilisation of tax deducted at source; Changes to reflect emerging issues and adopt global best practices; Clarity on the timing of deduction and definition of key terms.
The approved regulation is expected to be published in the official gazette in the coming days, “ Oyedele stated.
The Committee also recommends the following changes to the VAT and Excise Duties: Full deduction of input VAT on all supplies, including services and assets; Zero-rated list expanded to include agriculture, medical and educational and other basic consumptions; Exports of services and intellectual property to be zero rates; Compensating adjustment to VAT rate and alignment with ECOWAS directive on VAT rate; Faster refund process for VAT; VAT fiscalisation and electronic invoicing ; adjustment to VAT sharing formula and basis; Inclusion of VAT in the Exclusive Legislative List; Excise tax simplified and limited in scope with clarity as to rates, liable party and timing among others.
and then