The huge tax burden has no doubt been a clog in the wheel of the overall performance of businesses over the years. There have been numerous fora expressed concern on the escalation of taxes, including excise duties and its adverse implication on the business operating environment.
The intervention of the president signing the suspension of the five per cent Excise Tax on telecommunication services; suspension of Excise Duties on Tobacco (30% ad valorem rate with the introduction of specific rate of N4.2/stick of cigarette for 2022; N4.7 per stick for 2003; and N5.2/stick in 202); Beer (N40/lite in 2002; N45/lite in 2023 and N50/lite 2024); and Wine/Spirit (20% ad valorem rate with a specific rate of N50/litre in 2022) as proposed in the 2022 Fiscal Policy Statement.
The suspension of 10% Green Tax by way of Excise Tax on Single Use Plastics (SUPs), including plastics containers and bottles; Import Tax Adjustment (IAT) of 2% on imported motor vehicles of 2000cc to 3999cc and 4% on 4000cc engines. The new Orders will, no doubt, support the efforts at improving the operating environment and mitigate the high cost of doing business in Nigeria, particularly with the aftermath of the removal of fuel subsidy.
Furthermore, in the bid to curb multiple taxations as complained by a cross-section of
Nigerians and the business community, President Bola Tinubu has signed four Executive Orders, which include the suspension of the 5% Excise Tax on telecommunication services as well as the Excise Duty escalation on locally manufactured products. The suspension which now defers the commencement date of the changes contained in the Act from May 23, 2023 to September 1, 2023. This is to ensure adherence to the 90 days minimum advance notice for tax changes as contained in the 2017 National Tax Policy.
Numerous businesses are currently grappling with the challenges posed by rising costs, shrinking profit margins, and underutilization of capacity. These difficulties stem from multiple macroeconomic factors as well as the impact of the Naira redesign policy. One of the main priorities of this administration is to streamline our tax system and its collection methods. The President, in his inaugural speech, expressed his intention to simplify and make the tax system more business-friendly. It is important to recognize that effective revenue management involves more than just tax collection; it begins with our economic policy. The ultimate goal is not to burden the impoverished with taxes.
Rather than focusing on taxing production, the government aims to foster increased productive activities and boost production capacity. Subsequently, the focus will shift towards taxing citizens’ consumption, aligning with their economic planning objectives. Additionally, the government seeks to enhance public trust by implementing a comprehensive plan to improve tax collection and compliance management. It is important to note that there are currently no plans to introduce new taxes. Instead, the emphasis is on enhancing the collection process and ensuring compliance with existing tax regulations.
Effects of the Suspension of the 2023 Finance Act
Below are various effects of the suspension of the 2023 Nigeria finance act:
- Uncertainty: The recent suspension of the 2023 finance act can create uncertainty and confusion among businesses, individuals, and investors. The act typically contains provisions related to taxes, tariffs, incentives, and other financial regulations. When suspended, it may be challenging for stakeholders to understand the applicable rules and plan their financial activities accordingly.
- Business Competitiveness: Adjustments in taxation or regulatory measures within a finance act can enhance the competitiveness of businesses. Lowering tax rates or reducing compliance burdens can attract investment, encourage entrepreneurship, and promote economic growth.
- Delayed Reforms: The Finance acts often include measures aimed at improving the economy, promoting investment, and enhancing fiscal policies. The suspension of the act could delay the implementation of these reforms, potentially impacting economic growth and development.
- Investment Incentives: The suspension of specific tax provisions may attract domestic and foreign investments. By offering tax incentives or exemptions, the government can encourage investment in targeted sectors, promoting job creation, infrastructure development, and overall economic progress.
- Revenue Collection: The Finance Acts generally outline tax policies and regulations. The suspension of the act may affect the government’s ability to collect revenue effectively. It could lead to a decrease in tax compliance as individuals and businesses may be uncertain about their obligations or take advantage of the lack of clear guidelines.
- Investment Climate: Investors often rely on the stability and predictability of financial regulations to make informed decisions. The suspension to the finance act can create a negative perception of the investment climate, potentially deterring both domestic and foreign investors.
- Compliance Simplification: Finance acts often introduce complex tax regulations and compliance requirements. Suspending or revising such acts can lead to simplified and clearer tax frameworks, reducing administrative burden and compliance costs for individuals and businesses. This can encourage greater tax compliance and reduce the likelihood of tax evasion.
- Budget Implementation: The Finance act is closely tied to national budgets, as they outline revenue sources and expenditure plans. Suspending the act may disrupt the implementation of the budget and hinder the government’s ability to execute its planned programs and projects for the fiscal year in which the budget was prepared for.
It’s important to note that the effects of suspending a finance act can vary depending on the specific provisions and the duration of the suspension.
