Nigeria Senate Passes Finance Bill 2020

The 2020 Finance Bill transmitted by President Muhammadu Buhari on November 25 for consideration has been passed by the Senate on Tuesday for the third reading.

The bill, which has 77 clauses was passed following the adoption of the report of the Senate Joint Committee on Finance, Customs, Excise and Tariff, Trade and Investment, and Public Procurement at the Committee of the Whole.

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 was done in two weeks.

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.

This, Buhari said would be achieved through strategic reforms on specific taxation, customs, excise, fiscal and other laws.

He said the reform was to adopt appropriate counter-cyclical fiscal policies to respond to the economic and revenue challenges caused by a decline in international oil prices and the impact of the COVID-19 pandemic.

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“Reform extant fiscal policies to prioritize job creation, economic growth, socio-economic development, domestic revenue mobilization, as well as to foster closer coordination with Monetary and Trade Policies.

“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.

“Propose measures time fund for the Federal Government’s COVID-19 pandemic response and introduce provisions to enhance the recovery of corporate donations toward responses to the COVID-19 pandemic, as well as any similar crisis in the future.

“Amend certain aspects of the Fiscal Responsibility Act, to align this Act with the 1999 Constitution (as amended) as well as to enhance fiscal efficiencies by controlling the cost-to-cost revenue ratios of key state and Government-owned Enterprises.

“Amend the Public Procurement Act to implement key procurement reforms previously proposed by the National Assembly in 2019, to extend the scope of the Act to the Federal Judiciary and Legislature, accelerate procurement processes, increase mobilization fee thresholds and provide for essential e-procurement reforms.” 

However, the Chairman of the joint committee, Solomon 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.

He Said, It will also reform extant fiscal policies to prioritize 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.

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.

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 to be reduced from 25 percent to 15 percent 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 organization after a total period of 6 years of a 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 the 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 percent.”