World Bank Mandate States To Implement Tax Relief Or Lose $2.5m Each

States in Nigeria will receive $2.5 million each from the world Bank depending on their tax incentive performance. The fund was tied to encourage states to provide needed tax relief to cushion the economic downturn on households and businesses within each state in Nigeria.

The implementation of tax relief by each state government until September 30, 2020, will determine if the World Bank will disburse the fund. AllNews gathered that part of the tax relief expected to be implemented includes; extension of filing and payment dates; tax moratoriums; waivers or reduction of penalties, and interests over the extension period.

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The performance-based fund was agreed upon on August 14, during a virtual meeting organised by the World Bank and Nigeria Governors Forum, alongside the federal ministry of finance, budget and national planning. The discussion was centred on the States’ Fiscal Transparency, Accountability and Sustainability (SFTAS) Programme.

What You Need To Know

In order to obtain financial support from World Bank to assist state revenue amidst COVID-19 pandemic, the 36 states must see to it that they implement tax relief while increasing or initiating tax on residents. Note that Lagos state has been implementing taxes on the entertainment and car-hailing services.

In a statement signed by the head of media and public affairs of NGF, Abdulrazaque Bello-Barkindo, it was stated that “The 36 states of the federation are introducing tax relief programmes to mitigate the unending toll of the COVID-19 pandemic on businesses and individual taxpayers and ensure the speedy recovery of state economies.

“State governments are themselves currently experiencing a liquidity crisis of their own; and with limited capacity to borrow, it has become imperative that they find a balance between granting tax reliefs and maintaining revenues at a sustainable level.

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“The extent to which government revenues will be impacted by these reliefs will depend on the type of relief that they grant and their ability to raise their tax efforts simultaneously, including offering incentives for greater tax compliance.

“These efforts are being incentivised by a new Disbursement Linked Indicator (DLI) under the Federal Ministry of Finance Budget and National Planning (FMFBNP) World Bank $750 million States Fiscal Transparency, Accountability and Sustainability (SFTAS) Programme for Results.

“Eligible States will be rewarded with USD2.5 million each in performance-based grants if they announce by 31st July 2020 and implement by ‪30th September 2020, a tax compliance relief programme for individual taxpayers and businesses to mitigate the COVID-19 impact.” The statement quoted by The Cable disclosed.