President Bola Tinubu on Friday approved the establishment of a Presidential Committee on Fiscal Policy and Tax Reforms.
He appointed the Fiscal Policy Partner and Africa Tax Leader at PriceWaterhouseCoopers, Taiwo Oyedele, as committee chairman.
Friday’s development came barely 24 hours after the President signed four Executive Orders, suspending the five per cent excise tax on telecommunication services and the excise duties escalation on locally-manufactured vehicles.
According to a statement signed by Tinubu’s Special Adviser on Special Duties, Communication and Strategy, Dele Alake, the presidential committee will comprise experts from both the private and public sectors and have responsibility for the various aspects of tax law reform, fiscal policy design and coordination, harmonisation of taxes, and revenue administration.
The President had on Thursday put the brakes on the implementation of some of the tax changes made by his predecessor, Muhammadu Buhari.
Tinubu had provided a temporary reprieve to businesses and households that have been groaning under the weight of new charges aimed at propping up government revenue.
The President signed four Executive Orders, postponing the enforcement of taxes on telecommunication services and alcoholic beverages.
He also suspended the green tax, including the single use plastics tax and the import adjustment levy on certain categories of vehicles.
The Finance Act (Effective Date Variation) Order, 2023 defers the commencement date of the changes contained in the Act from May 28, 2023, to September 1, 2023.
“This is to ensure adherence to the 90 days minimum advance notice for tax changes as contained in the 2017 National Tax Policy,” Alake said while briefing State House journalists.
Another Executive Order suspended the 5 percent excise tax on telecommunication services as well as the excise duties escalation on locally manufactured products.
Alake said the President ordered the suspension of the newly introduced Green Tax by way of excise tax on single use plastics, including plastic containers and bottles, as well as the import tax adjustment levy on certain vehicles.
The latest action of the President, according to Alake, was part of efforts to address key concerns raised earlier by manufacturers and other stakeholders regarding recent tax changes introduced by former President Buhari.
“The issue of multiplicity of taxes has become a major challenge to organised businesses in Nigeria”
While the intentions behind the upward adjustments of some of these taxes by the previous administration were quite noble because they were designed to raise revenue as well as address environmental and health issues of concern, however, they had generated some significant challenges for, and elicited serious complaints among key stakeholders as well as in the business community.
Many of the affected businesses were already contending with the rising costs, falling margins and capacity underutilization due to the various macroeconomic headwinds as well as the impact of the naira redesign policy.
It is expected that the suspension of excise duty rates (taxes) on alcoholic beverages and tobacco products will ease the burden on manufacturers.
Excise duties are indirect levies placed on the manufacture of locally produced goods. Countries usually implement them to discourage the purchase of goods that may harm consumers or the environment and also serve as a source of additional revenue to the government.
Manufacturers are expected to rejoice because those taxes were really unfair on them.
Over the years, they have been galloping with all manner of problems coupled with the recent removal of fuel subsidy and the exchange rate unification.
Overall, these moves are expected to facilitate a business friendly environment and signal a responsive tax policy direction for the country going forward.
Deferring the commencement date of the Finance Act 2023 is also in line with global best practice as prescribed by the 2017 National Tax Policy.
According to the 2023 Fiscal Policy Measures document signed in March by Zainab Ahmed, the former Minister of Finance, Budget and National Planning, the taxes to be paid by alcoholic beverage firms starting from June more than doubled.
Total specific rate for beer and stout, wines, spirits (per litre) was N300, a 114.3 percent growth from N140 last year. Tobacco’s specific rate was N8.20 per stick, 95.3 percent increase from N4.2 per stick in 2022.
It was also 76.4 percent higher than the rates they were meant to pay this year before the review and 32.5 percent (N408.2) higher in 2024.
The total ad-valorem rate levied on alcoholic beverages and tobacco products rose by 40 percentage points to 110 percent in June from 70 percent in the same period of last year. The total ad-valorem rate for next year still stands at 110 percent.
Before the taxes were updated, the total ad-valorem rate was previously set to be 70 percent effective in June.
The issue of multiplicity of taxes has become a major challenge to organised businesses in Nigeria.
Currently businesses are made to pay over 50 different taxes and sundry charges, among which are: corporate income tax, import duties, export duties, excise duties, rents, capital gains tax, personal income tax, value added tax, stamp duties, property tax, licences, motor parking fee, motor vehicle fee, withholding tax, land tax, market licence fee, road tax, business premises, dividend tax, NHIS levy, advert fee, regulation fees, the new NYSC levy as well as the regular user charges such as electricity, water, disposal fee.
This huge tax burden, no doubt, has been a clog in the wheel of the overall performance of organised businesses over the years.
Manufacturers had at numerous fora expressed concern on the escalation of taxes, including exercise duties and its adverse implication on the business operating environment.
It is our opinion that the new Orders would support the efforts at improving the operating environment and mitigate the high cost of doing business in Nigeria, particularly with the aftermath of the removal of fuel subsidy.
We see the suspension of the implementation of the Finance Act 2003 as a relief for overburdened businesses in Nigeria because the issue of multiplicity of taxes has become a major challenge to organised businesses in the country.