How Tax Reforms Will Benefit SMEs, Nigerians
As Nigerians await the National Assembly’s passage of the proposed tax reform bills, Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, has listed some of the potential benefits of reforms.
The tax bills, which include Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service Establishment Bill, and Joint Revenue Board Establishment Bill, are aimed at addressing the nation’s tax system’s gridlocks such as multiplicity of taxes, fragmentation of revenue administration, and issues with the excessive tax burden on most vulnerable citizens, including small businesses and low-income earners.
The bills, when passed into law, are expected to exempt low-income earners from Pay As You Earn (PAYE), reduce PAYE tax for those earning a monthly salary of N1.7million or less, and keep value added tax (VAT) on food, healthcare, education, electricity generation and transmission at zero percent.
It will also ensure VAT exemption on transportation, renewable energy, CNG, baby products, sanitary towels, rent, fuel products, tax break for wage award and transport subsidy to low-income earners. It will also provide tax incentives for employers to hire more people incrementally than in the previous three years.
“The business person does not need the tax authority’s or government’s permission to claim their VAT. Once you pay VAT and you have the invoice on your own at the end of the month, you deduct that VAT from the VAT that you need to pay,” Oyedele said in a recent X Space.
Other benefits include: exemption of stamp duties on rent below N10 million, PAYE tax exemption for other rank and armed forces fighting insecurity, friendly tax rules for remote workers and digital nomads, as well as clarity on taxation of digital assets to avoid double taxation and allow deduction for losses
For small businesses, the law is expected to ensure tax exemption threshold for small businesses with annual turnover of N25 million to N50 million, exemption from company income tax for small businesses (tax at 0%), and zero withholding tax deduction on business income of small businesses.
High income earners will also benefit from the bill when passed into law, as it seeks VAT exemption on purchase of real estate, clarity on taxation of benefit in kind and limit of taxable accommodation benefit to 20 percent of annual income, with an exemption of tax on sale of shares up to N150 million and gains not exceeding N10 million.
For the states which produce more zero-VAT-rated products, he emphasised that companies paying tax by consumption data will not affect them as the goal is to make Nigeria produce more than it consumes.
According to Oyedele, “We are collecting both consumption data and production data so that nobody is disadvantaged as a result of producing goods that are considered exempt or zero-rated.”
Oyedele further said, “People are buying sugar to do all manners of things. You know, people are buying fast-moving consumer products. They are paying for electricity. So, every state in Nigeria, regardless of what you’re producing, is also consuming.”
BusinessDay
