2020 Fiscal Act Comes With Plenty of Goodies but Also Some Baggage


Thursday, January 16, 2020 /09:38 AM / By FDC Ltd / Header Image Credit: @NigeriaGov


President Buhari has signed the finance bill into law. This comes days after assenting to the 2020 budget. The new law amends a number of extant tax laws including the Company Income Tax (CIT), Value Added Tax (VAT), Petroleum Profit Tax, customs and excise tariff, Personal Income Tax, Stamp Duties Tax and the Capital Gains Tax.


The main objective of the finance bill is:

1.       To promote fiscal equity


2.      Reform the domestic tax laws to align with global best practices


3.  Introduce tax incentives for investments in infrastructure and capital markets


4.      Support MSMEs


5.      Increase Government revenues


Key Highlights

1.       VAT to increase to 7.5% from 5%


2.      Companies with turnover less than N25 million pa are tax-exempt from CIT (Progressive tax)


3.    Companies that earn between N25 million - N100 million annually will pay 20% of their profit as CIT


4.     Companies with annual income in excess of N100 million annually will pay 30% of their profit as CIT


5.      To avoid double taxation, tax on dividends is no longer applicable


6.   Tax Identification Number (TIN) is a prerequisite for operating a bank account


7.   The threshold for stamp duty on online transactions increased to N10,000 from N1,000


8.  Stamp duty removed for bank transfers below N10,000 9. Goods and services redefined to cover intangible items  


The Goodies

The introduction of a bill that amends various tax laws is a welcome development in the tax system. This could boost the economy by stimulating the growth of small and medium scale enterprises and increase foreign direct investments into the country.


In addition, the VAT increase is expected to help fund the minimum wage implementation by state governments. State and local governments will receive 85% of the revenue while the federal government will receive 15%.


The baggage

It is no news that consumer demand has been relatively weak, the revised VAT would have a knock-on effect on consumer disposable income due to the additional 2.5% VAT on most consumer goods. The wage increase and higher VAT will exacerbate inflationary pressures.


Inflation has increased consecutively since September 2019 and an increase in consumer price inflation is imminent. If the higher VAT leads to a spike in inflation in January, the MPC would be left with no alternative but to commence a tightening cycle and raise the MPR.


Finally, the onus is on the government to address tax revenue shortfalls, eliminate leakages and improve transparency in expending the collected revenue.


Proshare Nigeria Pvt. Ltd.

Related News

  1. Will the FG Tax Reforms Support Revenues in 2020?
  2. New VAT Rate: Knock On Effect On Consumer Prices Likely To Drive Up Inflation
  3. President Buhari Signs Finance Bill, 2019
  4. Nigeria's Finance Bill 2019 Key Changes and Implications
  5. Finance Bill 2019 Compels Individuals to Produce Their TIN Before Operating Bank Accounts
  6. House of Representatives Passes Finance Bill, 2019
  7. Finance Bill 2019: Tax Implications for Nigerian Entities
  8. Senate Passes Finance Bill, 2019
  9. 2019 Finance Bill: 20 Sweeping Changes To Nigeria's Tax Laws That May Affect You
  10. The Key Changes In The 2019 Finance Bill - Focus on Taxation
  11. TAT Judgement On Taxation Of Dividend Paid From Tax-Exempt Income
  12. Nigeria: We Live In Taxing Times! But Should Government Increase VAT Rate?
  13. Companies Operating In Nigeria To Pay 0.005% Net Profit Levy Under The NPTF (Establishment) Act 2018
  14. Matters Arising On VAT - Income Model vs Gross Product Model
  15. MTEF Review: VAT Increase Could Be A Smoke Screen For Something Larger
  16. TAT - It Is Illegal To Impose Tax Based On Taxes And Levies Act Without A Primary Taxing Law
  17. Companies Operating In Nigeria To Pay A New Police Fund Levy
  18. FEC Approves Increase In VAT To 7.5% From 2020, To Seek NASS Approval For Enabling Law
  19. Tax 101 - How The Proposed VAT On Online Transactions Will Affect You
  20. N311.94bn Generated As VAT in Q2 2019 - NBS
  21. LIRS Issues Public Notice on TIN Registration; To Leverage On The Existing BVN Operations
  22. Increase VAT Gains through Efficient VAT Management
  23. Fowler Calls For Increase In VAT Collection in Nigeria
  24. Implications Of FGN's Increase Of VAT Rate To Pay For The New Minimum Wage
  25. FG Revises Excise Rates For Specific Products
  26. Value Added Tax Modification Order For The Power Sector
  27. The Income Tax (Transfer Pricing) Regulation, 2018- Is This A Game Changer?
  28. An Overview of Nigeria's 2018 Income Tax (Country By Country Reporting) Regulations
  29. FG to Remove VAT on Residential Properties, Amends Company Income Tax Law
  30. Financial Services Agents Call On CBN To Address Stamp Duty Charges
  31. RMAFC Set to Audit Deposit Money Banks Over Stamp Duty Collections
  32. N50 Stamp Duty: Banks begin execution, lists exemptions but still have many issues unanswered

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.
Related News