The Senate has passed the Finance Bill 2020. The entire process of the passage of the legislation was done in two weeks.
The bill seeks to amend 12 Acts which include the Capital Gains Tax Act; Companies Income Tax Act (CITA); Personal Income Tax Act; Tertiary Education Trust Fund (Establishment) Act; Customs and Excise Tariff, etc (Consolidated) Act and the Value Added Tax.
Others are the Federal Inland Revenue Service (Establishment) Act; Nigeria Export Processing Zone Act; Oil and Gas Export Free Zone Act; Fiscal Responsibility Act; Companies and Allied Matters Act 2020; and the Public Procurement Act.
The bill was transmitted to the Senate by President Muhammadu Buhari in November who said its passage would support the implementation of the 2021 budget through key reforms to specific taxation, customs, excise, fiscal and other laws.
The passage of the bill followed the consideration of a report by the Senate Joint Committee on Finance; Customs, Excise & Tariff; Trade and Investment; and Public Procurement – having held a public hearing for stakeholders to make inputs.
The Chairman of the joint committee, Adeola Olamilekan, who presented the report, said the Finance Bill will adopt appropriate counter-cyclical fiscal policies to respond to the economic and revenue challenges precipitated by the decline in international oil prices, as well as the impact of the COVID-19 pandemic on the Nigerian economy.
It will also reform extant fiscal policies to prioritise job creation, economic growth, socio-economic development, domestic revenue mobilization, to foster closer coordination with Monetary and Trade Policies; and provide fiscal relief for taxpayers by reducing the applicable minimum tax rate for two consecutive years of assessment, as well as reforming the commencement and cessation rules for small businesses, he said.
The legislation, he said, will also propose measures to fund the federal government’s COVID-19 pandemic response and introduce provisions to enhance the recovery of corporate donations towards responses to the COVID-19 pandemic, as well as any similar crisis in the future, amend certain aspects of the Fiscal Responsibility Act and enhance fiscal efficiencies by controlling the cost-to-cost revenue ratios of key state and Government-owned Enterprises.
Mr Adeola read out numerous recommendations by the panel. Some of these are: the inclusion of free duty and levy for commercial airline operators in line with presidential waivers and approval already granted by the President in the Customs and Excise Tariff Act (CETA).
For Capital Gain Tax, it recommended that returns should be filed per year on the 30th of June and 31st December of every tax year. It also said deductions provided for in the Company Income Tax should, among others, be based on the actual cost of the in-kind donation instead of the value which may be different from what the donor actually incurred.
“The Committee recommends that Section 25(9) of CITA proposed be reduced from 25 per cent to 15 per cent of assessable profits to reduce the amount of deductions available for voluntary donations made to State or Local Government. And penalty or fine to be disallowed should be restricted to those imposed by legislation enacted by the National Assembly or States Houses of Assembly with the aim of removing the restriction that will be occasioned by the proposal in the Bill with the aim of ease of doing business.”
For Industrial Development Income Tax Relief (IDITRA), the panel said deduction in the Tax Relief periods from initial five years to four years and additional three years to two years as this will enable the government to start taxing the relevant organisation after a total period of 6 years of tax holiday.
For Value Added Tax (VAT), the committee said goods and services exempted should include commercial aircraft, engine, spare part, airline transportation ticket, hire rental on lease of tractors plough and other agricultural equipment or implements should be included as parts of goods and services exempted from VAT.
For Stamp Duty, the panel recommended that “the Minister in charge of finance subjects to the approval of the National Assembly shall make regulation for the imposition, administration, collection and remittance of the electronic levy. And the sharing formula of the electronic levy between States and Federal Government with States Government taking 85% and Federal Government being the collecting agent on behalf of the States collects 15 per cent.”
While for Unclaimed Fund Trust Fund, the Committee recommended among others that, “The Debt Management Office shall – maintain a reliable database of all unclaimed dividends and dormant bank balances constituting the debt owed by the Trust Fund which shall be verified and reconciled with the Securities and Exchange Commission, and the Central Bank of Nigeria on a bi-annual basis.
“Liaise with the relevant Registrars of Companies, deposit money banks or the National Deposit Insurance Corporation, as the case may be, to make adequate arrangements for the repayment of the verified interest and capital obligations due to the relevant shareholders, depositors or their legal beneficiaries, as the case may be.
“Prepare and implement a plan for the efficient management of the obligations of the Trust Fund, which plan shall include setting guidelines, modalities and other arrangements, which may include an annual sinking fund, for the servicing of the interest and capital obligations of the Trust Fund.”
The bill was passed after it was considered in the Committee of the Whole. It will be transmitted to the president for assent.