By Tony Obiechina, Abuja
In response to ongoing health and economic challenges occasioned by the COVID-19 pandemic, the federal government has adopted appropriate counter-cyclical fiscal policies to speedly pull the economy from current recession.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed who stated this in Abuja said the strategy will also stimulate economic growth in key sectors of the economy.
A statement by the Special Adviser on Media and Communications, Mr Yunusa Tanko Abdullahi on Monday, quoted the minister as stating at the public consultation for the Finance Act, 2020, that economic activities in the country are recovering gradually.
Her words, “Economic activities in the country are recovering gradually, reflected by a reduced contraction of 3.6 percent in the third quarter of 2020, compared to the 6.1 percent contraction in the previous quarter.”
According to Ahmed, given the impact of the pandemic on the domestic economy, there was, a clear need for proactive implementation of macroeconomic strategies that would support domestic revenue mobilisation, enhance investment inflow, stimulate job creation and restore the economy on the path of sustainable, diversified and inclusive growth.
In her words, “As we are aware, the COVID-19 pandemic triggered an economic downturn across most economies of the world. By the end of 2020, the world’s economy fell into recession with the contraction estimated at 3.5 percent compared to global growth of 2.8 percent in 2019. The Nigerian economy was also impacted by the pandemic, reflected by the contraction in economic growth in the second and third quarters of 2020, respectively.”
“As such, the Finance Act, 2020 provides fiscal relief for minimum wage earners (who are exempt from personal income tax), as well as commuters and other consumers of road transportation goods and services (who will now pay lower levels of duties and levies on imported vehicles).
“The Finance Act, 2020 extends the corporate income tax exemption in the Finance Act, 2019 for micro and small enterprises with an annual turnover of N25 million or less to include exemption from paying tertiary education tax,” she further noted.
“The Finance Act, 2020 also consolidates on the fiscal reforms introduced in the Finance Act, 2019. The Act has introduced 80 changes to about 14 different tax laws including the company income tax Act, the capital gains tax Act, stamp duties act, oil and gas export free zone Act, customs and excise tariff etc. (consolidated) Act, value added tax Act, amongst others.
She pointed out that given the government’s current challenges, however, “with increasing domestic revenue mobilisation in a recovering economy, it is not possible to provide all the tax incentives that various interest groups have been clamouring for.
“Consequently, our fiscal stance in the Finance Act, 2020 is to moderate fiscal incentives, defer tax increases and new taxes till the economy recovers, and to foster greater congruence across the Government’s fiscal, monetary, trade and investment policies.”
The Minister charged the Fiscal Policy Reforms Committee to take note of important issues raised during the sessions and collate any concerns that taxpayers, investors, businesses, individuals and other key stakeholders may have regarding the Finance Act, 2020.
She stated that the window was open for ideas and concepts for inclusion into next year’s Finance Bill, adding that, as promised, the consultative process with all stakeholders would begin earlier to facilitate greater stakeholder engagement.
She also noted that the tradition of enacting annual finance bills does not preclude the need for more fundamental legislative reforms to key taxing statutes.
“These laws are being reviewed and efforts to reform them are ongoing. For example, the petroleum industry bill currently being considered by the National Assembly will fundamentally change the way in which our petroleum producing companies are currently being taxed under the extant petroleum profits tax Act.
“Consequently, if any reforms proposed by key stakeholders have not been reflected in the Finance Act, 2020, there will be other opportunities to include deserving reforms in subsequent Finance Acts, or indeed, the wholesale amendment of other fiscal and economic laws,” she assured.