- States to get 85% VAT proceeds
The Senate and House of Representatives have agreed on the many provisions of the Finance Bill presented by President Muhammadu Buhari for passage into law, including a proposed 7.5 percent raise on Value Added Tax (VAT).
Both chambers have already received the reports of their committees on Finance after holding separate public hearing on the Bill with various stakeholders.
Some sections of the various tax laws which the Bill sought to be amended have been expunged and others were replaced with new sections.
On November 21, the Senate Committee on Finance laid its report before the upper chamber, while its sister committee in the House of Representatives presented its report on November 28, 2019.
The two reports were laid by the Chairmen of Finance Committees, Senator Solomon Olamilekan Adeola, and his counterpart in the House of Representatives, Honourable James Abiodun Falake, respectively.
Senator Adeola, said while presenting the report that the seven in one Finance bill 2019, has been thoroughly considered and passed by the Senate based on recommendations of the Finance committee.
In passing the bill based on the committees report, the senate adopted almost all the amendments totalling 56, sought for by the executive in the seven different tax Acts, consolidated into one bill.
However, Faleke said their report was an outcome of public hearing with various stakeholders that raised concerns over some contents of the Bill.
The bill from both chambers wants an amendment on the Companies Income Tax Act, Cap C21 Laws 2004 (as amended to date), Value Added Tax (VAT) Cap VI, LFN, 2000 (as amended), Customs and Excise Tariffs etc (Consolidation) Act, Cap C49 Laws of the Federation of Nigeria 2004.
Others are Personal Income Tax Cap P8 LFN 2007 (as amended), Capital Gains Tax Act Cap C1, LFN 2007, Stamp Duties Act Cap 58, LFN 2007 and the Petroleum Profit Tax.
However, both chambers seek to promote fiscal equity, reform domestic tax laws, introduce tax incentives, support small businesses and raise revenue sources for government proposed an increase of Value Added Tax (VAT) from 5 percent to 7.5 percent.
Senator Adeola said the 2.5% increase on VAT is purely targeted at the affluent in the society by focusing it on luxury goods which are not consumed by the poor people.
“Even on distribution of gains derived from the VAT, 85% on what is collected go to the state and local governments. Only a paltry sum of 15% stays with the federal government.
“Also included in this finance bill, we now have reliefs for some small companies that if your revenue as a company is less than N25 million, you are exempted from payment of VAT and also tax
“We also went a step further that if you are a company which we have tagged to be a medium company whose revenue is less than N100m, your company income tax has been reduced from 30% to 20%,” he said.
Honourable Faleke on his part said the House also approved the proposed VAT increase from 5% to 7.5% on some goods as well as some services rendered in Nigeria or outside defending on other provisions.
Both chambers approved that the Nigerian Postal Service (NIPOST) will no longer collect the N50 Stamp Duties as the power has been transferred to the Federal Inland Revenue Service (FIRS).
Both chambers agreed on the section of the bill which provides for a taxable persons who fail or refuses to register with FIRS within the time specified in the bill for the registration.
“Any taxable person who fails to submit returns shall be liable to a fine of N50,000 for the first month and N25,000 for subsequent month of default,” it added.
The Bill as approved by the National Assembly also approved the amendment to the Customs and Excise Tarriff, etc (Consolidation), Act and empowered Nigeria Customs to impose duty on “goods manufactured in Nigeria and specified in the Fifth Schedule to this Act shall be charged with duties of Excise at the rate specified under the Duty Column.”
The Bill further approved that, imported goods and or manufactured in Nigeria shall be charged Excise Duties at the specified rates which will protect local industries by eliminating double taxation and make their prices competitive.