Business

Temporary relief as Tinubu defers, suspends Buhari’s 11th hour tax drive

July 7, 2023

By Terhemba Daka, Collins Olayinka (Abuja) and Tobi Awodipe (Lagos)

President Bola Tinubu, in a face-saving measure, yesterday, announced reversal of some of the latter day tax policies taken by former President Muhammadu Buhari before he exited office on May 29.

The move followed recent backlash over the impact some of the administration’s economic policies were having on citizens.
The action, announced by Dele Alake, Special Adviser on Special Duties, Communications and Strategy to the President, is aimed at putting Nigerians at the centre of government policies.

According to him, some of the tax policies were being implemented retroactively, with their commencement dates in some instances, pre-dating the official publication of the relevant legal instruments backing them.

He further explained that the decision is in fulfillment of President Tinubu’s promise to address business unfriendly fiscal policy measures and multiplicity of taxes.

To this end, he said President Tinubu has signed four Executive Orders. They include the Finance Act (Effective Date Variation) Order, 2023, which has now deferred the commencement date of the changes contained in the Act from May 23, 2023 to September 1, 2023.

According to the presidential spokesman, this is to ensure adherence to the 90 days minimum advance notice for tax changes as specified in the 2017 National Tax Policy.

The second one is the Customs, Excise Tariff (Variation) Amendment Order, 2023, which shifts the commencement date of the tax changes from March 27, 2023 to August 1, 2023 and also in line with the National Tax Policy.

The third Executive Order signed by the president suspended the five per cent Excise Tax on telecommunication services as well as the Excise Duties escalation on locally-manufactured products.

The last Executive Order also suspended the newly introduced Green Tax by way of Excise Tax on Single Use Plastics, including plastic containers and bottles. Tinubu also ordered the suspension of the Import Tax Adjustment levy on certain vehicles.

Alake explained: “As a listening leader, the President issued these orders to ameliorate the negative impacts of the tax adjustments on businesses and chokehold on households across affected sectors.

“The President wishes to reiterate his commitment to reviewing complaints about multiple taxation, local and anti-business inhibitions. The Federal Government sees business owners, local and foreign investors as critical engines in its focus on achieving higher GDP growth and appreciable reduction in unemployment rate through job creation.

“The government will, therefore, continue to give requisite stimulus by way of friendly policies to allow businesses to flourish in the country. President Tinubu wishes to assure Nigerians by whose mandate he is in power that there will not be further tax raise without robust and wide consultations undertaken within the context of a coherent fiscal policy framework,” he added.

According to him, some of the problems identified with the tax changes include the 2017 National Tax Policy approved by the President Buhari administration, prescribing a minimum of 90 days’ notice from government to tax-payers before any tax changes can take effect.

“This global practice is done with a view to giving taxpayers and businesses reasonable time to adjust to the new tax regime. However, both the Finance Act 2023 and the Customs, Excise Tariff Order 2023 did not give the required minimum notice period, thus putting businesses in violation of the new tax regime even before the changes were gazetted.

“As a result of this, many of the affected businesses are already contending with the rising costs, falling margins and capacity underutilisation due to the various macroeconomic headwinds as well as the impact of the Naira redesign policy,” he said.

He also noted that the Excise Tax increases on tobacco products and alcoholic beverages from 2022 to 2024, which had already been approved, are also being implemented.

Reacting to a question on whether the President’s action would affect the Petroleum Tax and if new taxes would be introduced, the Special Adviser on Revenue, Mr Zach Adedeji, said the intent of the President was to lighten tax burdens, harmonise and manage already existing taxes in the best interest of Nigerians.

“As you rightly said, there’s a plan or possibly proposal for Petroleum Tax; if you look at the current price templates, that has already been included. So, this suspension has nothing to do with that. The pricing structure that you have for PMS today has been included; there’s no new taxes we’re bringing in.

“Like my colleague has said, one of the key focuses of this administration is to harmonise our taxes and the way we collect it. Mr. President actually wants to simplify and make it friendly to business. As we know when we talk about the revenue management, it’s not only in tax collection, the starting point is our economic policy, because our aim is not to tax poverty.

“Our aim is not to tax production. Our aim is to increase our productive activities, capacity to produce, then we can tax our consumption and that is the direction of our economic planning and then we want to increase the trust that we have in the government. If you observe what has happened in the last months that we’ve been here, we’ve kept our words.”
REACTING, the Association of Licensed Telecommunications Operators of Nigeria (ALTON) said suspension of the five per cent excise duty on telecom services has taken away the burden of collections off telecom operators and the weight off subscribers, but there are more tax issues that need to be addressed by the government.

Chairman of the association, Gbenga Adebayo, noted that the issue of multiple taxation in the telecom industry has been a major challenge. According to him, telecom operators are currently paying a total of 39 taxes and levies, which need to be addressed by the Tinubu administration.

While noting that the government has acted responsibly by suspending the excise duty, Adebayo said the tax would have compounded the current woes of many Nigerians who are already battling with the increase in the price of several other products and services.

Adebayo added that the telecom industry should not be treated as an extractive industry as it is neither an oil and gas nor a mineral exploring industry, but a sector providing social services that have impacts on the economy and lives of the people.

SIMILARLY, president of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Dele Oye, has applauded the interventions by government in suspending the implementation of hike in some taxes. In a statement, Oye said this administration’s commitment to ensuring that Nigerian businesses are not unduly burdened by unfavourable policies is welcome and appreciated.

He noted that though the tax changes were intended to raise revenue while addressing important public health and environmental concerns, the lack of adequate notice and clarity on implementation of the changes resulted in significant challenges for affected businesses, including rising costs, falling margins and capacity underutilisation amid rapidly dwindling spending power.

Oye also urged the Federal Government to continue to engage with stakeholders and implement policies that are business-friendly and promote sustainable economic growth.

“We believe that the private sector is essential to achieving the government’s goal of higher GDP growth and reduced unemployment rate through job creation. We look forward to collaborating with the government to create an enabling business environment that will attract more investment into the country and enhance the competitiveness of Nigerian businesses,” he said.
THE President has also been urged to go beyond suspension of excise duties and prioritise merging of revenue collection functions of the Nigerian Maritime Administration and Safety Agency (NIMASA), Nigerian Ports Authority (NPA) and Nigeria Customs Service (NCS), as well as harmonise taxes and levies of these agencies to simplify the process and reduce the burden on companies, which are invariably passed on to consumers.

Welcoming the steps, Chief Executive Officer of Dairy Hills Limited, Kelvin Emmanuel, said suspension of the commencement of excise duties on telecoms is a breath of fresh economic air.

“The levies and taxes on telcos are considered to be among the highest in the world according to the International Telecom Union. Nigeria has one of the highest corporate income tax rates for telcos and there are 41 different taxes and levies across federating units for telcos. This is an indication that the President is well on track to harmonisation of taxes, considering the increased cost of doing business from the 300 per cent hike in diesel, and 280 per cent hike in Premium Motor Spirit (PMS) from deregulation.”

He equally observed that the decision of the President to suspend the hike in levies for imported vehicles is an indication that the President understands how the deregulation of PMS and unification of Naira has impacted the cost of duties for car imports, and the inflation in price consumers have to put up with for purchase of imported cars.

An investment banker, Joshua Eze said: “The suspension of taxes on telecommunication services, locally-produced vehicles and certain vehicles could indirectly help the poor by making these things more affordable. President Tinubu’s executive orders were designed to find a balance between tax reforms and the concerns raised by businesses and stakeholders. These measures have the potential to benefit the economy and offer some relief to the poor population.”

A social commentator, Abisodun Ogunfunminire, expects prices to start easing soon believing that the Executive Orders will unburden the bottlenecks for investment to come into the economy.(VANGUARD)

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