The Finance Act 2020 will help realize the 2021 Budget targets by creating the balance between attracting investment, creating jobs and providing fiscal incentives towards increased revenue to grow the economy, Minister of Finance, Budget and National Planning, Zainab Ahmed, has said.
The N13.5trillion Budget of ‘Economic Recovery and Resilience’ aims at accelerating the country’s economic recovery, promoting social inclusion and strengthening the resilience of the economy to recover from the impact of COVID-19 and the recession.
Minister was speaking in Abuja during a virtual media briefing to provide details to the Appropriation Act signed by President Muhammadu Buhari on December 31, 2020.
With the dwindling revenue flows to the economy as a result of the negative impact of COVID-19 pandemic, the government appears under pressure to explore alternative revenue streams to boost economic growth.
During the briefing, the minister said the country’s aggregate revenue of N7.99trillion falls far short of the total N13.5trillion budget outlay by about N5.6trillion deficit.
In seeking to improve revenue through increased taxation, the Minister said the government also has a responsibility to provide incentives to encourage compliance.
14 reforms under Finance Act 2020
Specifically, she said the Finance Act 2020 adopts fiscal policies to counter the negative impact COVID-19 pandemic by providing fiscal relief for taxpayers as well as ensure closer coordination of monetary, trade and fiscal policies.
The Finance Act 2020, the Minister said, consists of over 80 reforms to over 14 laws, namely Capital Gains Tax Act, Cap. C1; Companies Income Tax Act, Cap C21; Personnel Income Tax, Cap C49; Value Added Tax Act, Cap. VI; Nigeria Export Processing Zone Act, Cap N107; the Oil and Gas Export Free Zone Act, Cap 05, and Industrial Development (Income Tax Relief) Act, Cap. 177.
Other laws include the Stamp Duties Act, Cap S3; Tertiary Education Trust Fund (Establishment) Act No.16, 2011; Federal Inland Revenue Service (Establishment) Act No 13, 2007; Fiscal Responsibility Act No. 31, 2007; Public Procurement Act No.14, 2007; Companies and Allied Matters Act No. 3, 2020 and the Establishment of the Crisis Intervention Fund & Unclaimed Fund Trust Fund.
Incentives under Finance 2020
Under the Finance Act 2020, there are provisions for compensation to companies for Capital Gains Tax losses of up to N10million, while donations to any pandemic or natural disaster relief fund by the Federal or any State government are tax deductible subject to a maximum of 10 percent of assessment profit after deduction of other allowable donations.
Also, the Act allows 50 percent reduction in minimum tax, from 0.5 percent to 0.25 percent of gross turnover less investment income, for companies in respect of returns for years of assessments due to a period of two years (between January 1, 2020 and December 31, 2021.
Apart from exemptions from Personal Income Tax to all low income earners of minimum wage or less, all micro & small companies earning N25million or less as annual turnover are exempted from Tertiary Education Tax, same as commercial airline tickets, commercial aircraft spare parts and components.
Those interested in land and buildings; animal feed and hire, rental or lease of agriculture equipment for agricultural purposes are exempted from Value Added Tax at 7.5 percent,
In addition, any small or medium sized company engaged in primary agricultural production may be granted pioneer status (tax relief) for an initial period of 4 years and an additional two years.
For companies operating in the Free Trade Zones, exemption from taxes is subject to compliance with tax filing and returns obligation to the Federal Inland Revenue Service (FIRS) under section 55(1) of the Companies and Income Tax Act.
Again, the Act allows for a reduction from 35 to 5 percent of import duty on tractors, while mass transit vehicles for transport of more than 10 persons and trucks are from 35 to 10 percent, and import levy on cars from 30 to 5 percent.
Other incentives include the expansion of goods liable to excise duties to include services in the future as may be prescribed in the law or an order by the President.
A new 50 percent Cost-to-Revenue Ratio has been introduced for State-Owned and Government-Owned Enterprise, with the balance of operating surplus paid to the Consolidated Revenue Fund (CRF) of the Federation on a quarterly basis.
Reforms on procurement
On Procurement, the application of the Public Procurement Act is to be extended to the National Assembly as well as the Judiciary, in addition to the provision for electronic and virtual procurement processes,
The mobilization fee thresholds have been increased from 15 to 30 percent, while the timelines for procurement has been reduced to accelerate the procurement process.
The Act also establishes a N500billion Crisis Intervention Fund, funding by Special Accounts and other sources approved by the National Assembly.
The Fund also comprises unclaimed dividends in a listed company and unutilized amounts in a dormant bank account outstanding for six years or more.
On Tuesday, the Minister said the unclaimed dividends and bank balances are subject to a Perpetual Trust under management by the Debt Management Office till an owner or beneficiaries emerge with evidence.
The Transmission Company of Nigeria (TCN) on Thursday said it has successfully recovered t…