FGN, 2020 Finance Bill Will Not Increase Taxes

“As experts have frequently pointed out, the solution to increasing Nigeria’s tax revenue is to widen the tax base rather than increase the tax burden on the very few Nigerian individuals and companies that pay taxes.  Quoting IMF figures, Andersen Tax points out that “out of the Nigerian labour force of 77 million persons, only 10 million persons are registered for tax purposes”. In 2019, Nigeria’s tax to GDP ratio was only 6.1%, comparing very poorly to Jamaica’s 26.8%, Botswana’s 19.2 % and Burkina Faso’s 15.0 %”.

The Federal Executive Council (FEC) Wednesday gave its assent to the 2020 Finance bill, which would now be sent to the National Assembly for scrutiny and legislative approval.

Minister of Finance, Budget and National Planning Zainab Ahmed told newsmen at the State House in Abuja the bill would serve as an auxiliary document to the 2021 budget, noting that it would not spur a rise in taxes as the economic conditions of the nation would not encourage that.

Ms. Ahmed said the legislation was instead looking “to make incremental changes to tax laws relating to Customs and Excise as well as other fiscal laws to support the implementation of the annual budget.”

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“In the last Finance Bill 2019, we reduced taxes from 30 percent to 20 percent for enterprises that have a turnover of between N25 million to N100 million.

“We also moved taxes from 30 percent to zero percent for enterprises that have a turnover of N25 million and below, which means they pay no taxes,” she added.

The Finance Bill 2020 will retain education tax at 2 percent, according to the minister, for the lower class of enterprises with revenue of N25 million downward.

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“So, when we say ‘incremental,’ it means gradually making changes; it means the changes may be up or down but for now, with the economic slowdown, our assessment is that this is the time to cut down on taxes, to not increase taxes at all and to not increase levies.”

She mentioned that there was a planned duty cut for vehicles used for mass transit purposes and stressed that the government had no ambition of raising the value-added tax.

As experts have frequently pointed out, the solution to increasing Nigeria’s tax revenue is to widen the tax base rather than increase the tax burden on the very few Nigerian individuals and companies that pay taxes.

Quoting IMF figures, Andersen Tax points out that “out of the Nigerian labour force of 77 million persons, only 10 million persons are registered for tax purposes”. In 2019, Nigeria’s tax to GDP ratio was only 6.1%, comparing very poorly to Jamaica’s 26.8%, Botswana’s 19.2%, and Burkina Faso’s 15.0%.

Announcing the approval of the Finance Bill by the FEC on Twitter, the finance ministry said the bill was “critical to the implementation of the 2021 Budget,” a claim that has been rebutted by experts on the grounds that the legislation does not include any tax rate hikes nor deliver a sufficient package of structural reforms capable of improving the growth outlook.