The Finance Bill which was passed into law at the beginning of the year took effect on the 1st of February 2020. While Nigerians are unopposed to most of the adjustments to company taxes and the bank charged, there are reservations to the increase in VAT from 5% to 7.5%. Nigeria is one of the nations of the world with the lowest VAT rates and hence a low tax to GDP ratio. The President Buhari-led government among other objectives is looking to increase government revenues through this increase. The funds are expected to be deployed to the health and education sectors as well as infrastructure projects.
We did a sentiments analysis of tweets of the key-phrase “7.5% VAT” and found that 50% of Nigerians had negative sentiments about the new law while the 50% had unpolarized views.
Inside the Bill
- Increased VAT rate from 5
percentto 7.5 percent
- Small businesses with turnover less than N25m to be exempted from Companies Income Tax
- Stamp duty on bank transfer to apply only on the amount from N10,000 and above. Transfers between the same owner’s accounts in the same bank also to be exempted
- A lower Company Income Tax rate of 20% to apply to medium-sized companies with a turnover between N25m and N100m
- Banks to request for Tax Identification Number (TIN) before opening bank accounts for individuals, while existing account holders must provide their TIN to continue operating their accounts
- Email correspondences to be recognised for communicating with tax authorities
- VAT deregistration is required for companies discontinuing operations
- Remittance of VAT now to be on a cash basis, that is, the difference between output VAT collected and input VAT paid in the preceding month