‘Finance Act Will Align Tax Laws to Current Realities’

Dike Onwuamaeze

Financial and tax experts have described the recently enacted Finance Act 2019 as a welcome development that will assist the government to implement the 2020 budget and align tax laws with the nation’s current realities.  

The experts also held the view that the new legislation would cure the deficiencies of the major primary tax legislations in the country by amending obsolete and contentious provisions 

According to the President of Chartered Institute of Taxation of Nigeria (CITN), Gladys Olajumoke Simplice, who was a keynote speaker at, “Tax Seminar on Finance Act 2019,” which was organised by the Okwudili Ijezie and Co. Chartered Accountants, last weekend in Lagos, said the Finance Act would usher in a new beginning for a country that has stayed long on the fence on matters of taxation. 

Simplice applauded government decision to raise Value Added Tax (VAT) by 50 per cent from five per cent to 7.5 per cent and noted that the greatest achievement of the act was the reawakening of the consciousness of taxation among Nigerians. 

“I believe that VAT increase is good. Let us tax luxury consumptions. The increase has been compensated with the give and take the government has done, especially for the Micro, Small and Medium Enterprises (MSMEs) and exemption of goods consumed by the poor from VAT payment,” Simplice said.

Also, the Chairman of Colindale Consulting, Preye Ogriki, agreed that the federal government took the right step by enacting a finance act to go with the 2020 budget, which is Nigeria’s first since 1999. He said the Finance Act would actually begin the journey of making taxation the major source of public revenue in Nigeria and the diversification the country’s economy from oil.  

Similarly, a Senior Lecturer in the College of Management Scxiences, Rhema University, Aba, Abia State, Dr. Udochukwu G. Ogbonna, said the major aim of the Finance Act was to bring changes in the Nigerian tax laws and make them responsive to tax reform policies of the federal government.

Ogbonna, noted that the failure of the Act to define what it meant by a foreign company’s ‘significant economic presence’ in Nigeria and allowed it to be determined by the Minister of Finance via executive orders would hamper its implementation. He recommended for more consultations to enhance the effective implementation of the Finance Act. 

Also, the Managing Partner of Modilim and Co., Dr. Patrick Modilim, pointed out that the Finance Act amended some sections of existing tax laws in the country without abrogating the entirety of these laws, which are Companies Income Tax (CIT), Petroleum Profit Tax (PPT), Personal Income Tax (PIT), Value Added Tax (VAT), Customs and Excise Tariffs law, Capital Gain Tax (CGT) and Stamp Duty Tax (SDT). 

According to Modilim, the amendment of Section 19 of CIT by Section 5 of the Finance Act solved the problem of double taxation and removed excess dividend tax rules that discouraged corporate savings and retention of profits. Now companies could retain investible income rather than paying out all profits as dividend.

The Coordinator of Tunji Adeniyi and Associates Limited, Dr. Tunji Adeniyi, said that the Finance Act came with both threats and benefits to the MSMEs. Adeniyi said the threats would include lowered derive demand for their products, wage rate pressure, high cost of business financing and high cost of doing business, which might push many of them out of business. He identified the benefits in the act as follows: the promotion of fiscal equity by enabling firms and individuals to pay tax proportionately and promotion of ease of doing business. The act also would also stimulate production and encourage reinvestment of profits. 

On his part, the Chief Executive Officer of Armlink Ventures, Musa Mamman Kolo, opined that the Finance Act has tremendous incentives for businesses, especially the insurance and real estate firms. For instance, life and non-life insurance companies would no longer be liable to the payment of special minimum tax provision while all wholly, reasonably, exclusively and necessarily incurred expenses would now be tax deductible including reserve for expired risks calculated on time apportionment basis. In addition, “insurance companies would be able to carry forward losses indefinitely as opposed to the 4-year restriction currently in place,” Kolo said, adding that the: “Exemption of dividends received by Real Estate Investment Companies from taxes – Section 7 of the Finance Act has introduced a new paragraph (t) to section 23 (1) of the extant CITA, to the effect that dividends and rental incomes received by Real Estate Companies on behalf of their shareholders are exempted from tax.”

However, the Founding Managing Partner of Okwudili Ijezie and Co., Blakey Ijezie, noted that government’s decision to increase the VAT by 50 per cent would trigger inflationary pressure, saying Nigeria may record between 15 and 20 per cents inflation rate by July this year.