Private sector slams FG as Buhari signs finance bill

The Organised Private Sector on Monday warned the government against fleecing the people and endangering productivity.

They spoke in response to the signing of the Finance Bill into law by the President, Major General Muhammadu Buhari (retd.) in Abuja.

The law heralds a new regime of Value Added Tax (VAT) rate of 7.5 per cent, up from five per cent.

The Nigeria Employers’ Consultative Association (NECA) warned the government against seeing the private sector as a cash cow in its drive to increase revenue.

On the other hand, the Lagos Chamber of Commerce and Industry (LCCI) expressed worry over the increase in VAT; even it said that it was inappropriate to compel loss-making firms to pay tax, no matter how little.

The Director General, NECA, Dr Timothy Olawale, noted that overburdening the private sector with taxes would further impoverish the citizens Buhari promised to take out of poverty.

He said, “The government should not see the private sector as a ‘cash cow’ in its drive to raise revenue, as it will do more harm to the already burdened private sector and further impoverish citizens that the president promised to take out of poverty.

“The common man will definitely be at the receiving end of the increase in VAT. Even if businesses are taxed more through likely illegal levies and rates outside the provisions of the law, they will naturally pass the cost to the customers whose purchasing power is already at the lowest ebb.

“The government should put mechanisms in place to eliminate leakages as a large chunk of the Internally Generated Revenue realised does not find its way into government coffers.

“They should drastically cut the cost of governance. Several aides kept at prohibitive cost are needless.”

He acknowledged that the government had made provisions in the law that were meant to benefit the masses while reforming the local tax laws in line with global best practices.

The new law amended the Petroleum Profit Tax Act, Customs and Excise Tariff Act, Company Income Tax Act, Personal Income Tax Act, Value Added Tax, Stamp Duties Act and the Capital Gains Tax.

Olawale said, “Apart from the increase in VAT, some other changes would include a situation where Nigerians who want to open or maintain accounts with the deposit money banks will not have to provide their Tax Identification Number to do so, which is commendable.

“Again, the fact that the Federal Government has raised the threshold from which stamp duty will be charged for online transactions from the current N1, 000 to N10,000.”

He recommended aggressive taxpayer enlightenment and expansion of the tax net to capture more citizens as it had been reported that less than 40 per cent of Nigerians were tax compliant.

Director General of the LCCI, Dr Muda Yusuf, said, “The increase in VAT from five per cent to 7.5 per cent amounts to additional burden on investors.

“Already businesses have been grappling with multiple taxation, high import duty, high regulatory charges, exclusion from the official forex market and high energy cost.

“It is also disturbing that in Nigeria, VAT is not treated as consumption tax. Most often it is imposed on the entire value chain of production and investment. This is why investors will worry about the review.”

The LCCI boss urged the government to scale up its commitment to the creation an enabling environment for investment, adding “this should be from the perspective of policy, regulatory and macroeconomic environment.”

Buhari had announced the signing of the bill through his verified personal twitter handle, @MBuhari.

“I am pleased to announce that this morning, I signed into the law the Finance Bill, 2019,” he tweeted.

The finance bill provides several revenue windows for the Federal Government to source funds, especially for the immediate financing of the 2020 budget.

The country’s budget for the year is N10.59tn, with a huge deficit of over N2tn.

Besides the VAT Act, the new law amended a number of other existing laws, including the Petroleum Profit Tax Act; Customs and Excise Tariff Act; Company Income Tax Act; Personal Income Tax Act; Stamp Duties Act; and the Capital Gains Tax.

The Federal Executive Council had approved 7.2 per cent new VAT rate on September 10, 2019, while Buhari presented the Finance Bill to the National Assembly on October 8 along with the 2020 Appropriation Bill.

The National Assembly eventually passed an amended version of 7.5 per cent as contained in the finance bill before lawmakers proceeded on the Christmas and New Year break.

Both have now become Acts of the National Assembly, the President having given assent to them.

For the VAT, the Federal Government had explained the urgency to increase it, saying that it would also provide more funds to the 36 states and the 774 local government councils to enable them to meet pressing financial needs, especially the payment of the new minimum wage of N30,000.

The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, speaking on this, had stated, “We reported to council and council has agreed that we start the process towards the increase of the VAT rate. We are proposing and council has agreed, increase in the VAT rate from five per cent to 7.2 per cent.

“This is important because the Federal Government only retains 15 per cent of the VAT; 85 per cent is actually for the states and local governments. The states need additional revenue to be able to meet the obligations of the minimum wage.

“This process involves extensive consultations that need to be made across the country at various levels and also it will involve the review of the VAT Act. So, it is not going to be implemented immediately until the Act is reviewed.”

Another provision of the new law is that the threshold on which stamp duty will be charged on online transactions has been raised to N10, 000 from N1, 000.

Meanwhile, the Presidency, in a statement on Monday, confirmed that Buhari indeed signed the Finance Bill into law.

“President Muhammadu Buhari Monday in State House signed the 2020 Finance Bill into law. This is sequel to its passage by the National Assembly and subsequent forwarding by the legislature to the President for assent”, the Special Adviser to the President on Media and Publicity, Mr Femi Adesina, said.

The statement recalled Buhari’s presentation to the National Assembly.

It quoted him, “This Finance Bill has five strategic objectives, in terms of achieving incremental, but necessary, changes to our fiscal laws.

“These objectives are promoting fiscal equity by mitigating instances of regressive taxation; reforming domestic tax laws to align with global best practices; introducing tax incentives for investments in infrastructure and capital markets; supporting Micro, Small and Medium-sized businesses and raising revenues for government.

“The draft Finance Bill proposes an increase of the VAT rate from five per cent to 7.5 per cent, as such; the 2020 Appropriation Bill is based on this new VAT rate.”

The Federal Government is targeting about N2.08tn this year from the Value Added Tax revenue, according to the Medium Term Expenditure Framework.

A breakdown of the N2.08tn showed that the Federal Government alone would receive about N315.47bn, representing 15 per cent; states, N1.04tn, representing 50 per cent; while the local government areas would get N751.43bn or 35 per cent. – Punch.