How Finance Act 2020 Will Boost Purchasing Power Of Nigerians- Experts

The 2020 Finance Act will enhance the purchasing power of Nigerians amid surging prices of goods and services, economic experts have said.

The Finance Act 2020 which was signed into law on December 31 last year became effective on January 1, 2021.

The new law introduces over 80 changes to 14 different laws in the 2019 Act that will affect all stakeholders, including small businesses and low income earning Nigerians.

Nigeria’s new Finance Act 2020 exempts earners of minimum wage from Personal Income Tax.

With the rising prices of goods, the government had approved a new minimum wage amounting to N30, 000, up from the N18, 000 wage.

The new tax regime also exempts all micro and small companies earning N25m or less as annual turnover from Tertiary Education Tax.

Nigeria imposes TET on every resident company at the rate of two per cent of the assessable profit for each year of assessment.

With the new tax regime, there are adjustments to incentive such that any small or medium sized company engaged in primary agricultural production in Africa’s largest economy gets a six- year tax relief, representing an additional two years from the Finance Act 2019.

The new law also clarifies that land and building are not taxable goods for Vat Added Tax purposes, a reversal that exempts Nigerians from paying VAT on house rent and lease of real property whether residential or commercial.

Nigeria had on February 1, last year reviewed its VAT by 50 per cent to 7.5 per cent, up from five per cent.

For Paul Alaje, a Senior Economist, SPM Professionals, the new Act would make the “disposable income of the average Nigerian more useful to them.”

Alaje also said the Act would be a big boost for those who are into primary production in agriculture.

“The Finance Act particularly the new one will benefit almost everybody. I think it is big news to the agric sector which the government is focusing on and also for those who might be importing cars who are of course the middle class,” he said on Arise TV.

He said the removal of the 7.5 per cent VAT on properties would also impact both the average and wealthy Nigerian.

But Taiwo Oyedele, Fiscal Policy Partner and West African Tax Leader of PricewaterhouseCoopers, said the new law would enhance the purchasing power of minimum wage owners, amid the huge surge in inflation.

The inflation figures according to the National Bureau of Statistics, has risen to 15.75 per cent.

He said Nigerians earning N30, 000 and below have the right to resist any form of PAYE deduction, adding it was improper.

“While it is true that many employers of low income earners do not deduct Pay As You Earn, they become vulnerable to extortion by unscrupulous tax officers during tax audits.

“So this exemption addresses the problem for small business owners,” Oyedele said on the role of employees.