Finance bill scales second reading in Senate

Nigerian Senate

File Photo: Nigerian Senate

The Finance bill 2021, forwarded by President Muhammadu Buhari to the National Assembly on Tuesday has scaled second reading in the Senate.

Senate Leader, Yahaya Abdullahi (Kebbi North) sponsored the bill.

In the letter to the Senate on Tuesday, the President explained that the request for the passage of the Finance bill was made pursuant to the provisions of Sections 58 and 59 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended).

According to him, it seeks to support the implementation of the 2022 Federal Budget of Economic Growth and Sustainability by proposing key reforms to specific taxation, customs, excise, fiscal and other relevant laws.

He added that the bill provides for enhanced Domestic Revenue Mobilization efforts to increase tax and non-tax revenues, and ensure Tax Administration and Legislative Drafting Reforms.

This, he said will particularly support the ongoing automation reforms by the Federal Inland Revenue Service.

Buhari stated that upon passage, the bill would accelerate International Tax Reforms to enhance the taxation of non-resident individuals and companies that derive profit from Nigeria.

Also, it will implement Financial Sector Reforms to support ongoing capital market reforms relating to Securities Lending Transactions, Real Estate Investment Trusts, Init Trust Schemes and the recapitalisation of Insurance Companies.

He noted that the Finance bill would also prioritize Critical Public Financial Management Reforms regarding the FIRS’ vital role in coordinating tax administration as well as the enforcement of key fiscal rules under the 1999 Constitution, Finance (Control and Management) Act and other relevant laws.

Senator Abdullahi, while leading debate on the general principles of the bill, said the finance bill seeks to amend seven different tax laws.

According to him, the amendment would promote fiscal equity, reform domestic tax laws to align with global best practices, introduce tax incentives for investments in infrastructure and capital markets, support MSMEs, and raise revenues for the government.

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He added that some areas which the legislation seeks to amend, are the contentious commencement and cessation rules in the Companies Income Tax Act.

“The effect of these rules is that companies suffer tax twice on profits of at least 12 months when they commence business.

“Conversely, on cessation of business, a period of up to 12 months escapes tax. The removal of these rules is considered a welcome development.

“Anti-avoidance provisions for business reorganization CITA empowers the FIRS to grant certain exemptions on group reorganizations, where certain criteria are fulfilled”, he explained.

Senator Abdullahi stated that the Finance Bill also seeks to amend the Personal Income Tax for the removal of conditions attached to tax exemptions, the introduction of a penalty for failure to deduct tax, and provision of Tax Identification number for opening bank accounts by individuals.

The amendment also seeks to make pension contributions tax-deductible without recourse to, and the approval of the Joint Tax Board.

“Quite significantly, the Finance Bill seeks to introduce sweeping changes to the tax laws covering seven different tax laws.

“Many of the changes are expected to have positive impacts on investments and ease of paying taxes, especially for MSMEs.

“Going forward, we hope that changes to the tax laws will be on an annual basis to ensure that Nigeria’s tax system continues to evolve in line with economic conditions.

“Mr President, Distinguished Colleagues, I believe that this Bill is tailored to meet the critical needs of this country at this point of our democratic evolution and economic situation”.

After consideration, the Finance bill was referred by the Senate President, Ahmad Lawan, to the Committees on Finance; Customs and Trade and Investment to report back next week Tuesday.

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