FEC approves Finance Bill 2020

19 Nov FEC approves Finance Bill 2020

The Federal Executive Council (FEC), presided over by President Buhari on Wednesday, approved the Finance Bill 2020 to support the 2021 Budget.

Minister of Finance, Budget and National Planning, Zainab Ahmed, told State House Correspondents after the meeting that the bill will effect incremental changes in the nation’s tax laws but will not lead to increase in taxes in the country.

She said the intent of the bill is to ease tax burdens on some categories of enterprises, especially small and medium enterprises.

“This is not the time to increase taxes, “she stressed.

The bill will soon be transmitted to the National Assembly for its consideration and passage into law.

“Through this Finance Bill, what we are seeking to do is to make incremental changes to tax laws relating to Customs and Excise as well as other fiscal laws to support the implementation of annual budget. When Mr. President presented the 2021 Budget to the Parliament, he did direct that the 2020 Finance Bill will also follow to support the budget proposals.

“We are working on implementing current fiscal reforms in line with the Multi-year Medium Term Framework and over time we hope that this Finance Bill, that the fiscal space will be reformed on an incremental basis.

“So this Finance Bills for 2020 was developed as a result of a very large multi-stakeholder effort under Fiscal Policy Reform Committee that has several ministries, departments and agencies as members, but also thee private sector, experienced tax practitioners and academics.

“A few of the provisions of the 2020 Finance Bills, the broad principle is to consider how we will have adequate macroeconomic strategies to attract investment, to be able to grow the economy on a sustainable basis, but also to create jobs as the immediate fiscal strategies to put in place accelerate domestic revenue mobilization in response to COVID-19 pandemic and the recent decline in the economy.

“Some highlights of these provisions include: amendments that we have had to make to provide incremental changes to tax laws. These amendments include providing fiscal relief for corporate tax payers, for instance by reducing the applicable minimum tax rate for two consecutive years. So from 0.5 percent to 0.25 percent, “she explained.

“These reforms will commence and will also be closely followed by the cessation rules for small businesses as well as providing incentive for mass transits by reducing import duties and the levies for large tractors, buses and other motor vehicles. The reason for us is to reduce the cost of transportation which is a major driver of inflation especially food production.

The Minister further said that the bill has also considered the need to create an instrument for crisis intervention fund so that the country could avert the sort of unbudgeted spending that the Novel Coronavirus (COVID-19) inflicted on the economy.

“We also have proposed measures to create a legal instrument that supports a crisis intervention fund such as, the crisis intervention that we have had to put in place for COVID-19. So we hope that we don’t have other crisis, but we need to create such a fund so that it is available and it is legislated.

“We are also amending the Fiscal Responsibility Act to enhance fiscal efficiencies and also to control the cost revenue ratios of government owned enterprises, so that we will be able to realize more operating surpluses from these enterprises.

Explaining how the bill would see to the reduction of tax burden on categories of Nigerian businesses, the Minister said “in the last Finance Bill 2019,we reduced taxes from 30 percent to 20 percent for enterprises that have turnover of between twenty five million Naira to one hundred million Naira. We also moved taxes from 30 percent to zero percent for enterprises that have turnover of twenty five million Naira and bellow which means they pay no taxes.

“What we are doing in the Finance Bill 2020 is to further renew the Education tax of two percent for that lower category of enterprises that have turnover of twenty five million Naira and bellow.

“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 slow down, our assessment is that this is the time to cut down on taxes to not increase taxes at all and to not increase levies. This is the time that we need to do that and that is what we are trying to do.

“Another example is the reduction in the duties for vehicles that will be related to the mass transit. Again, no increase in taxes and no increase in VAT,” she said.