Reacting to the bill, Director-General of Manufacturers Association of Nigeria, (MAN), Segun Ajayi-Kadir, said: The Finance Bill 2019 represents a holistic attempt by government to streamline our tax laws such as Company Income Tax, Personal Income Tax, Value added Tax and Excise Tax into a single legislative document.
Objective of the Bill
‘’So, this is commendable, as a close look at the bill reveals the following objectives of government:
“Promote fiscal equity by mitigating instances of regressive tax invasion;
“Reform domestic tax laws to align with global best practices;
“Introduce tax incentives for investment in infrastructure and capital markets;
“Support small businesses in line with the on-going reform on the ease of doing business; and
“Enerate more revenue for government, by various fiscal measures, including a proposal to increase the rate of Value Added Tax from 5% to 7.5%.
Grey Area on the Bill
“I would say that, even though some of the new provisions in the new Financial Bill 2019 are complementary to the improvement of the economic ecosystem, there are some grey areas that still require urgent and fundamental re-consideration and immediate amendment. They include: Increase in VAT from 5% to 7.5%.
“I really feel strongly about this rather ill-timed and unexpected u-turn in government’s position on VAT. It is a consumption tax, and as such, an increase would further depress consumption and eventually production.
“This will certainly lead to a weakening of the performance of the manufacturing sector and a resulting decline in the growth of economy. Already, our warehouses are literally bursting with high inventory of unsold goods due to unprecedented buyers apathy.
“What is needed is deliberate government policy to put more money in the pocket of the average Nigerian who can then make more purchases and improve their overall well-being.
States government 85%
“The news that 85% or so would go to the states and local governments to provide services at those levels may not necessarily be a cheery one, knowing the rating of those tiers of government in terms of value-for-money spent on projects and parlous performance on issues of governance.
Financial Bill and Minimum wage
“When you then place this increase at a time we are concluding on the minimum wage, it is like giving with one hand and taking back with the other, which leaves you on the same spot.
“Even the so called unaffected essential products or items are not so insulated. VAT is paid on inputs, such as packaging materials, electricity, raw materials and so on.
“This means that the final cost of the product has suffered VAT and so not charging VAT on the final product doesn’t mean that the consumer has not paid VAT. Therefore, we feel that rather than increasing VAT, government should widen its tax net and get people who are currently not captured to pay.
“There is also the need to harmonize taxes/levies/fees payable by businesses in the country to attract more investment that would translate to higher productivity and more tax revenue for the government in the medium and long term.”