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  • Finance Act will boost securities lending, REITs investment on capital market — Onyema

    Finance Act will boost securities lending, REITs investment on capital market — Onyema

    The Nigerian Stock Exchange (NSE) says securities lending will witness exponential growth with the elimination of tax on manufactured dividend arising from securities loan transaction by the Finance Act.

    Mr Oscar Onyema, NSE’s Chief Executive Officer, made the assertion at a symposium on the Finance Act, organised by the exchange in partnership with KPMG in Lagos.

    Onyema said an exponential growth in securities lending activities would further boost market liquidity, given the elimination of tax on manufactured dividend arising from securities loan transaction.

    Securities lending is the act of loaning a stock, derivative or other security to an investor or firm. Securities lending requires the borrower to put up collateral, whether cash, security or a letter of credit.

    When a security is loaned, the title and the ownership are also transferred to the borrower.

    The NSE’s boss explained that the multiple taxation embedded in securities lending business arrangement had slowed down its adoption in the Nigerian capital market despite being a 2.44 trillion dollars market globally.

    According to him, there have been some improvements with 20 million units of shares currently available for lending in the Nigerian capital market.

    “The recent amendment to the tax laws by the Finance Act 2019 is in line with global best practices for Securities Lending.

    “And, I want to seize this opportunity to enjoin capital market operators and asset owners to take advantage of the benefits,” Onyema said.

    He said the elimination of double taxation in Collective Investment Schemes (CIS) including Real Estate Investment Structures as pronounced by the Act would have significant impact on the growth of the currently nascent $2.77 billion asset management industry in Nigeria.

    “We have convened committees and conferences to dimension the real estate industry and the necessary policy changes required to jump-start financing into the sector.

    “So, this positive policy announcement is a good start towards increasing the viability of REITs for issuers and investors.

    “With the nation’s housing deficit put at 17 million units as estimated by the African Development Bank, I believe strongly that REITs and other real estate investment vehicles will play a critical role in funding real estate and infrastructure development in Nigeria.’’

    Onyema added that exemption of micro and small enterprises with an annual turnover of N25 million ($70,000) or less from paying company income tax by the Act aligned with the Exchange’s commitment to SMEs.

    According to him, SMEs and growth companies in our ecosystem can now enjoy tax benefits, thereby improving their operational efficiency.

    He noted that the signing of the Finance Bill into law was a landmark achievement for the Nigerian Capital Market.

    Onyema said the NSE, the Securities and Exchange Commission (SEC) and other capital market stakeholders had been at the forefront of advocacy with policy makers and tax authorities for favourable tax structures in the Nigerian capital market.

    Also speaking, Mr Wole Obayomi, Partner & Head, Tax, Regulatory and People Services, KPMG, said, “Finance Act 2019 is a landmark legislation that should be embraced by all stakeholders to ensure it achieves its laudable objectives.

    Obayomi said removal of multiple tax footprints for securities lending and real estate investment schemes would stimulate activities in those segments of the market.

    He stated that the generous incentives for SMEs in the Finance Act coupled with the launching of the Growth Board for capital raising by that sector from the NSE, were timely interventions.

    According to him, these will drive the growth of the economy through the SMEs.

    Also, Mr Ikechukwu Ene, Senior Manager, Tax, Regulatory and People Services, KPMG Nigeria, speaking on the implications of the Act to Nigerian corporates, financial markets and economy, said people needed to study the Act to understand it better.

    Ene highlighted essential areas in the Act for additional revenue generation as VAT increment, from five per cent to 7.5 per cent, changes in excise duty and global tax reforms, among others.

    On global tax reforms, he said that Nigeria had realised that it was important to follow global trends in global tax. (NAN)

  • Finance Act will stimulate Nigerian economy — Osinbajo

    Finance Act will stimulate Nigerian economy — Osinbajo

    Vice-President Yemi Osinbajo on Saturday asserted that the Finance Act 2020 would stimulate the Nigerian economy and put the country on the path of geometric economic growth.

    Osinbajo made the assertion at the Inspiration Conference 2020 of the Redeemer’s Men Fellowship (Lagos Regions) in Lagos.

    The conference had as its theme: “Galvanised for Geometric Growth”.

    He said the bill, which was signed by President Muhammadu Buhari on Jan. 13, was aimed at shoring up revenue for all levels of government to meet up with their expenditure.

     This, he said, was in addition to it supporting Small and Medium Enterprises (SME) in the country.

    “The challenges of growing the economy border on creating an environment favourable to businesses and low revenue generation,” Osinbajo said.

    He said that the 2020 budget of N10.6 trillion has a deficit of N2.2 trillion, “so it is clear that we are running a fairly large deficit”.

    “The sources of revenue are oil proceeds and taxes, and most states do not generate enough revenue to meet their financial expectations,” Osinbajo said.

    He cited Adamawa, Benue and Ekiti as some of the states with very low Internally Generated Revenue (IGR), too inadequate to cater for their expenditure.

    The vice-president justified the increment of the Value Added Tax (VAT) from 5 per cent to 7.5 per cent, noting it to be very low when compared to other African countries.

    “Ghana has 12.5 per cent; Cameroun has 19.25 per cent; Mexico with 16 per cent; South Africa at 15 per cent and Egypt at 14 per cent.

    “To make things easier for the common man, we have exempted 16 classes of food items, tampons, sanitary towels, and tuition fees from nursery to tertiary.

    “Also, before the Finance Act, many companies operating in the country without physical presence escaped taxation.

    “Most digital companies made significant revenue from e-commerce, online advertising and the likes, but were not taxed.

    “But now, once you have significant economic presence in Nigeria, but reside anywhere around the world, you are eligible to pay tax,” he said.

    Osinbajo expressed confidence in the Nigerian economy, maintaining that the government would continue to provide the enabling environment for businesses to thrive.

    He explained that in spite of the perceived low growth rate, the Nigerian economy was still relatively bigger when compared with other African economies.

    “Rwanda has a Gross Domestic Product (GDP) of $8.7 billion, while FCT, Akwa Ibom, Lagos, Rivers and Delta have growth rates of $29.9billion, $14 billion, $90 billion, $14.2 billion and $11.2 billion respectively.

    “Even Ghana is at $65.5 billion and is less than Lagos,” he said.

    He stated that the potential of the Nigerian economy has been boosted by agriculture, manufacturing, creative industry, technology and ICT.

    “Today, we produce an estimated 7.3 million metric tonnes of rice compared to 5 million metric tonnes in 2015.

    “Today, people are using technology to attract investments in agriculture through crowd funding.

    “There are incredible new ways of investing in agriculture in Nigeria, where companies are raising funds for farmers and farming, and such platforms should be invested on,” he said.

    Osinbajo also called for more collaboration between the government and the private sector to bridge the infrastructural deficit.

    “The Nigerian Liquefied Natural Gas Company (NLNG) and Dangote Group have already keyed into this, while 10 other companies have applied to execute 19 road projects of about 800km,” he said. (NAN)

  • Presidency explains Finance Act 2019

    Presidency explains Finance Act 2019

    The presidency had made pubic the breakdown of Finance Bill, 2019, which was submitted to the National Assembly by President Muhammadu Buhari alongside the 2020 Appropriation Bill, and signed into law by the president on Jan. 13, 2020.

    The breakdown was released by Mr Laolu Akande, Senior Special Assistant to the President on Media and Publicity, Office of the Vice President, on Sunday in Abuja.

    Th  Act has the following objectives.

    “Promoting fiscal equity by mitigating instances of regressive taxation.

    “Reforming domestic tax laws to align with global best practices.

    “Introducing tax incentives for investments in infrastructure and capital markets.

    “Supporting Micro, Small and Medium-sized businesses in line with the administration’s Ease of Doing Business Reforms.

    “Raising Revenues for Federal, State and Local Governments.”

    The fact sheet on the new Act indicates that it was the first legislation created to accompany an Appropriation Act since the return of democracy in 1999.

    The new Act raises VAT from five per cent to 7.5 per cent.

    To allay fears that low-income persons and companies will be marginalised by the new law, reduce the burden of taxation on vulnerable segments and promote equitable taxation, the Finance Act 2019 has extended the list of goods and services exempted from VAT.

    The additional exemptions include the following:

    “Basic food items – additives (honey), bread, cereals, cooking oils, culinary herbs, fish, flour and starch, fruits (fresh or dried), live or raw meat and poultry, milk, nuts, pulses, roots, salt, vegetables, water (natural water and table water).

    “Locally manufactured sanitary towels, pads or tampons.

    “Services rendered by microfinance banks; tuition relating to nursery, primary, secondary and tertiary education.

    “Nigeria’s increased new VAT rate of 7.5 pe rcent is still the lowest in Africa, and one of the lowest anywhere in the world — South Africa VAT: 15 per cent; Ghana: 12.5 per cent; Kenya: 16 per cent; Egypt: 14 per cent ; Rwanda: 18 per cent; Senegal: 18 per cent.”

    Under Nigeria’s revenue sharing formula, 85 per cent of collected VAT goes to States and Local Governments.

    This means that the bulk of additional VAT revenues accruing from the increase will go towards enabling States and Local Governments meet their obligations to citizens, including the new minimum wage as already noted by State Governors.

    The Buhari administration had firmly resisted previous suggestions to raise VAT.

    The new Finance Act exempts Businesses with turnover below 25 million from VAT payments.

    Companies Income Tax (CIT) — under the new law small companies – companies with less than N25 million in annual turnover are charged Zero CIT.

    “CIT for Companies with revenues between N25 and N100 million (described in the Act as “medium-sized” companies) has been reduced from 30 per cent to 20 per cent.

    “Large companies with annual turnover greater than N100 million will continue to pay the standard 30 per cent CIT.

    “The new Act includes a provision that grants to all companies engaged in agricultural production in Nigeria, an initial tax-free period of five years renewable for an additional three years.

    “The new Act also provides incentives to promote tax compliance through bonus reductions in CIT for early remittance:

    “Two per cent bonus for medium-size companies; one per cent bonus for other companies.”

    On Personal Income Tax, the new Act now includes electronic mail as an acceptable form of correspondence for persons disputing assessments by the Tax Authorities.

    Contributions to Pension and Retirement Funds, Societies and Schemes are now unconditionally tax-deductible.

    Stamp Duty Tax — with the new Act, the N50 Stamp duty charge is now applicable only to transactions amounting to N10,000 and above, a significant increase on the former threshold of N1,000.

    The new Act expands the list of items exempted from stamp duty.

    The new Act also makes provisions for Customs and Excise Tariff.

    It stipulates that to reduce unfair advantages previously conferred on imported goods at the expense of locally manufactured ones, certain imported goods are now subject to excise duties similar to locally manufactured goods. (NAN)

  • Finance Act: MAN DG seeks transitional guidelines for smooth conversion

    Finance Act: MAN DG seeks transitional guidelines for smooth conversion

    The Manufacturers Association of Nigeria (MAN) has called for transitional guidelines that would ensure smooth conversion from the pre-Finance Act laws to the changes introduced in the new Act.

    The Director-General(D-G) of MAN, Mr Segun Ajayi-Kadir,  made the call in a statement released on Thursday in Lagos.Ajayi-Kadir said that the call for the guideline was attributable to the peculiarity of business operations in the sector where the basis of revenue recognition was different from when sales and payment was received on items of goods produced.

    He suggested that the guidelines should provide practical terms on how to deal with and apply the change to the standard VAT rate from the effective date based on common taxpayers’ question.“There is usually a time lag between when customers make payments for sale orders and when the goods are made available to them.

    “This means that there will be significant instances of undelivered sales at the prevailing VAT rate of 5 per cent when the Law was signed, and when the new VAT rate increase will take effect.

    “We therefore feel that the sales order issued and paid prior to the effective date be invoiced at the current VAT rate of 5 per cent even after the effective date, while sales orders issued after the effective date be invoiced at the new VAT rate,” he said.

    The MAN DG raised concerns over the implication of the 2.5 per cent increment in Value Added Tax (VAT) as contained in the new Finance Act.

    He described the Act as a  positive initiative, saying that it streamlined tax laws into a single document, supported small businesses as well as offered incentives for investment in infrastructure.

    According to him, specifically, the concern is embedded in the implications of the increase in Value Added Tax from 5 per cent to 7.5 per cent for manufacturers.

    The D-G said that the increase in VAT was a sore point in the otherwise progressive movement that the Financial Bill represented in the tax system.

    “Nothing in the arguments adduced for the increase has controverted the fact that it is ill-timed and would negatively impact the producers and the consumers.

    “It is also an unexpected turn in the efforts of government to improve the competitiveness of the manufacturing sector and alleviation of diminishing standard of life of the average citizens.

    “You see, it is a consumption tax and  the increase would constrain consumption and eventually negatively impact  production.

    “So, it will constitute a drag on the performance of the manufacturing sector and add to a possible decline in the growth of economy.

    “Already our warehouses are stacked up with high inventory of  unsold goods due to unprecedented buyers apathy,” he said.

    Ajayi-Kadir said he had expected that government focused on ensuring policies that would engender circulation of funds to enable citizens make more purchases and improve overall wellbeing.

    However, seeing that government has gone ahead with the policy, the Director-General stressed the need to pay attention to the challenges that might be associated with the commencement of implementation.(NAN)

  • Tax expert urges Nigerians to support new Finance Act

    Tax expert urges Nigerians to support new Finance Act

     A Taxation Expert, Mrs Morenike Babington-Ashaye, has advised Nigerians to support the full implementation of the Finance Bill 2019 signed into law by President Muhammadu Buhari on Monday.

    Babington-Ashaye, also President, International Centre for Tax Research and Development, gave the advice on Tuesday while addressing newsmen in Lagos.

    The new Finance Act is meant to reform the country’s tax laws, aligning them with global best practices, support MSMEs, encourage investments in infrastructure and capital markets, and increase revenue for the government.

    Babington-Ashaye tasked the Corporate Affairs Commission (CAC) and other tax agencies to closely monitor the companies doing businesses in the country to guide against sabotage of the new law.

    She said there was the need for people to adequately abide by the principles of the Act.

    The Act has five strategic objectives including: promoting fiscal equity by mitigating instances of regressive taxation and Reforming domestic tax laws to align with global best practices;

    Other provisions are: Introducing tax incentives for investments in infrastructure and capital markets; Supporting Micro, Small and Medium-sized businesses in line with our Ease of Doing Business Reforms; and Raising Revenues for Government.

    It also seek to increase the VAT rate from five per cent to 7.5 per cent as well as provide more revenue to finance key government projects, especially in the areas of health, education and critical infrastructure.

    Babington-Ashaye said: “The Finance Act has a lot of good things contained in it which is quite good for the economy.

    “Take for instance, the issue of taxation; government uses taxation to motivate certain industries and also uses taxation as a basis for discouraging certain things.

    “Now, the new tax provision is that companies with N25 million turnover need not pay tax; this is a good way to motivate SMEs to work harder for improvement on the national GDP.

    ”But, my worry is how faithful will the tax payers be? Because, we can have a situation where those people who have higher turnover will now divide it into two, in order not to pay tax at all.

    “In order not to allow this to happen, government must ensure that those agencies in charge of tax collection, should monitor very closely these companies.

    “Government agencies such as CAC and other tax officers must be diligent to whatever they are doing so that tax payers don’t cheat on government.”

    She urged the agencies to watch closely and check compliance by various companies doing business in Nigeria.

    The expert also urged tax payers to pay their taxes to enable them to contribute toward achieving good governance by government, rather than sabotaging its efforts.

    Babington-Ashaye said if Nigeria could improve its tax collection windows, a lot of advancement would be recorded. (NAN)

  • NECA lauds Finance Act, urges compliance

    NECA lauds Finance Act, urges compliance

    Mr Timothy Olawale, the Director-General, Nigeria Employers’ Consultative Association (NECA), has lauded the Finance Bill which was signed into law by President Buhari, saying the Act had led to an increment to 7.5 per cent of Value Added Tax (VAT).

    Olawale made the commendation in a statement issued and made available to newsmen on Monday in Lagos.

    The DG noted that the President meant well for the country as evidenced in some pro-masses provisions in the Law and the objectives behind the new Law.

    He said that reforming domestic tax laws to align with global best practices, introducing tax incentives for investments in infrastructure and capital markets, and supporting Micro, Small and Medium-sized businesses, in line with our Ease of Doing Business Reforms, were positives of the new Act.

    He, however, urged government not to see the private sector as a cash cow in its drive to raise revenue.He explained that doing so would do more harm to the already burdened private sector and further impoverish citizens whom the President promised to take out of poverty.

    “The President means well and this is evident in some pro-masses provisions in the Law and the objectives behind the new Law.

    “Apart from the increase in VAT, some other changes would include a situation where Nigerians who want to open or maintain accounts with the Deposit Money Banks will not have to provide their Tax Identification Numbers to do so, which is commendable.

    “Government should, however, not see the Private Sector as a “cash cow” in its drive to raise revenue, as it will do more harm to the already burdened private sector and further impoverish citizens that the President promised to take out of poverty,” he said.

    The NECA boss urged Nigerians to comply with the new Law which had amended the Petroleum Profit Tax Act, Customs and Excise Tariff Act, Company Income Tax Act, Personal Income Tax Act, Value Added Tax, Stamp Duties Act and the Capital Gains Tax.Olawale, however, cautioned that the common man would definitely be at the receiving end of the increase in VAT.

    He noted that even if businesses were taxed more through levies and rates outside the provisions of the law, they would naturally pass the cost to the customers, whose purchasing power was already at the lowest ebb.

    In proposing a way out, the Director-General opined that what needed to be done by the government was an aggressive taxpayer enlightenment and expansion of the tax net.

    He said the move would capture more citizens as it had been posited, arguably, that less than 40 per cent of Nigerians was tax compliant.

    He also urged government to put mechanisms in place to eliminate leakages as a large chunk of the Internally Generated Revenue realised did not find its way into government coffers.

    He also reiterated the need for a reduction in the cost of governance as a means of generating more revenue for the government. (NAN)