The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, on Monday said despite calls for government to more provide tax incentives to critical sectors of the economy, it is practically impossible to do so in view of the current economic realities.
Zainab said this at a virtual public consultation for the Finance Act 2020 put together by KPMG in collaboration with the Federal Ministry of Finance, Budget and National Planning.
The Finance Act, 2020 which was assented to by President Muhammadu Buhari on December 31, 2020 provides fiscal relief for Minimum Wage Earners (who are exempt from Personal Income Tax), as well as commuters and other consumers of road transportation goods and services (who will now pay lower levels of duties and levies on imported vehicles).
The Finance Act, 2020 also extends the Corporate Income Tax exemption in the Finance Act, 2019 for Micro and Small enterprises with an annual turnover of N25m or less to include exemption from paying Tertiary Education Tax.
The Act also consolidates on the fiscal reforms introduced in the Finance Act, 2019. The Act has introduced 80 changes to about 14 different tax laws including the Company Income Tax Act, the Capital Gains Tax Act, Stamp Duties Act, Oil & Gas Export Free Zone Act, Customs & Excise Tariff Etc. (Consolidated) Act, Value Added Tax Act, amongst others.
Given the current challenges facing the economy as a result of the negative impact of the Coronavirus pandemic, some stakeholders have advocated tax reliefs to stimulate production in key sectors of the economy.
But speaking on the development, the Finance Minister explained that given the government’s current challenges with increasing domestic revenue mobilisation in a recovering economy, it is not possible to provide all the tax incentives that various interest groups have been clamouring for.
Consequently, she said the fiscal stance in the Finance Act, 2020 is to moderate fiscal incentives, defer tax increases and new taxes till the economy recovers, and to foster greater congruence across the Government’s fiscal, monetary, trade and investment policies.
She said, “The Public Stakeholder Consultations of last week, and today, demonstrate our commitment to continuously consult and engage on the Finance Act that was assented to by President Buhari on 31 December 2020.
“The Finance Act, 2020 will support the realization of our 2021 revenue projections, adopt appropriate countercyclical fiscal policies and enhance the efficiency of fiscal incentives.
“As such, our focus is on incremental fiscal reforms that support the 2020 Budget of Economic Recovery and Resilience.
“In response to ongoing health and economic challenges caused by the COVID-19 Pandemic, we have adopted appropriate counter-cyclical fiscal policies to accelerate economic recovery from the recent recession, as well as to stimulate economic growth in key sectors of the economy.
“As we are aware, the COVID-19 pandemic triggered an economic downturn across most economies of the world. The Nigerian economy was also impacted by the pandemic, reflected by the contraction in economic growth in the second and third quarters of 2020, respectively.
“Economic activities in the country are recovering gradually, reflected by a reduced contraction of 3.6 per cent in the third quarter of 2020, compared to the 6.1 per cent contraction in the previous quarter.”
Given the impact of the pandemic on the domestic economy, the Finance Minister stated that there was a clear need for proactive implementation of macroeconomic strategies that would support domestic revenue mobilization, enhance investment inflow, stimulate job creation and restore the economy on the path of sustainable, diversified and inclusive growth.