A Brief On the New Finance Act 2020 In Nigeria

A Brief On the New Finance Act 2020 In Nigeria

Since the signing of the new finance bill into law by president Muhammadu Buhari (GCFR), a lot has been going on in the mind of the average Nigerian on how the new law is going to impact them. This short note is written to highlight the importance of the New law and it's impact on the life of Nigerians.

The law is an amendment to seven extant fiscal laws; the petroleum profit tax act, the custom and excise tariff tax act, the company income tax, the personal income tax, the value added tax (VAT),the stamp act and gain tax respectively.

The objectives of the act as stated by the Minister of Finance, Budget and National Planning, Zainab Ahmed in her words are to; strategically promote fiscal equity by mitigating instances of regressive taxation, reform domestic tax laws and introduce tax incentives for investments in infrastructure and capital market.

In as much as the finance act has drawn mixed reactions from the populace, it is noteworthy that it has elicited commendation from the stakeholders in the various sector of the Nigerian economy because according to them the law would ease the burden that comes with double taxation on businesses. For instance, in the insurance industry, the insurance operators for 12years were charged double tax in billions on premiums and claims to be paid to the insured. The finance act has brought about the relieve they so much yearn for from the company income tax (Amendment) Act 2007 which was harsh on them.

Also, the issue of the increment of value added tax (VAT) from 5 percent to 7.5 percent has been a cause of major concern for most Nigerians. This has made the government to reveal that it was done to help finance the deficit in the Nation's budget and also to help raise revenue for infrastructure and other social amenities for the citizens. The Government further disclosed that the increase in VAT doesn't cover items related to the basic needs of the people. This includes locally made sanitary pads, food additives, table water, tuition relating to nursery, primary, secondary, tertiary education. 

Finally, the new law will bring about reduction in the country's over reliance on crude oil money, the Boom of which some proponents believe was the genesis of the countries economic somersault. The real sector is a large sector which is divided into three namely; the primary sector which is made up of agricultural industry and mining industry, secondary sector made up of manufacturing, building and construction industry, and the tertiary which is made up of the services and commerce industry. It can be recalled that the Primary sector used to be the main stay of Nigerian economy (accounted for over 80% of the GDP) before the Oil boom in the early 1970s, Nigerian Naira was very well strengthen against the dollar. The logic is that if the increased tax monies gotten from especially the Oil sector are used judicious to create necessary infrastructure to develop the real sectors this would mean that the country's GDP will increase significantly and from the foregoing one can see that the real sector is such a large sector that it's fortunes will conveniently increase the economic prosperity of the country s if properly managed.

In conclusion, the finance act 2020 made a good case in linking development to accruable tax revenues. This is just like what is obtainable in societies where development is financed through taxation, for example England. It is a welcome development. However, government must ensure an equitable balance between what it takes from the people and the development it gives back. For these to happen the government must make sure that all the revenue it garner through the platform of taxes must be judiciously utilized with visible projects for the people to see and feel to make life better for them. 

The reader should note that although the bill intended to be signed into law in December 2019 and take effect January 2020,it was however delayed due to changes and proper vetting made to it by both the Legislature and Executive respectively. Technically the law takes effect the day it was signed by the president unless a future date is stated when the law is published in the gazette. It is however expected that the effective date will be in the near future(February 2020 or later) to enable smooth implementation by both the tax authorities and taxpayers.

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