The Finance Bill which went through a third reading at the Nigerian Senate a week ago, will become effective on January 2, 2020.
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, made the disclosure on November 28, during a panel session with PwC executives on Finance Bill and Tax Strategy.
The bill which proposes an increase in the Value-Added Tax rate from 5 percent to 7.5 percent, will be reviewed annually in tandem with the plans of the Federal Government to increase the ratio of revenue to Gross Domestic Product from six percent to 15 percent by 2023. A greater percentage of the revenue is expected to come from non-oil sources.
Ahmed also divulged that once the finance bill is effective, the government will engage stakeholders every year to deliberate its performance. Although the module of the bill might not favour businesses at the initial stage, Ahmed said benefits will spring forth in the long run. She also mentioned that the Federal Government was currently working on a tax regime to stimulate the nation’s economy.
She said, “The Nigerian economy is characterized by structural challenges that limit the country’s ability to sustain economic growth, create more jobs and achieve significant poverty reduction”.
“One of the biggest challenges we face is our high dependence on oil for our economic activities, fiscal revenues, and foreign exchange earnings. In 2016, Nigeria fell into recession due to its vulnerability to oil. Although the oil and gas sector accounted for just about 10 percent of the GDP, it represented 94 percent of export earnings and 62 percent of government revenues (federal and state) in 2011-2015″.
“This narrative is changing, but we still have much more to do in order to get to our desired revenue to a GDP ratio of 15 percent by 2023, which we anticipate will come from non-oil revenues. We must grow our tax to GDP ratio from the current six percent as of 2018.”
The Finance Bill encompasses seven bills namely, Companies Income Tax, Value Added Tax, Customs and Excise Tariff, Capital Gains Tax Act, Petroleum Profit Tax, Personal Income Tax, and Stamp Duties Act. It seeks to make all bills receptive to tax policies.