According to tax expert Taiwo Oyedele, Nigeria’s new tax rules are President Muhammadu Buhari’s “parting tax gift” to the people.
PricewaterhouseCoopers (PWC)’s Oyedele is the Fiscal Policy Partner and Africa Tax Leader.
The federal government has announced new Fiscal Policy Measures (FPM) in a circular signed by Zainab Usman, Minister of Finance, Budget, and National Planning.
Oyedele broke down the new laws and highlighted the points in a Twitter analysis.
The Supplementary Protection Measures (SPM) are related to the implementation of the ECOWAS Common External Tariff 2022-2026, according to him.
The modifications take effect on May 1, 2023, with a 90-day grace period for importers who opened Form M before that date.
Rice, woven fabrics, ceramic tiles and sinks, steel, compressed or liquified gas containers, and aluminum cans are among the items on the list.
Washing machines, electric generating sets and rotary converters, smart phones, new and used passenger vehicles, and electricity meters are among the others.
According to Oyedele, the applicable duties for the majority of the commodities remain unchanged from the 2022 FPM rates.
The Revised Excise Duty Rates, which are extra excise taxes ranging from 20% to 100% increases on previously approved rates for alcoholic drinks, tobacco, wines, and spirits, were implemented on June 1, 2023.
These are additional increases above and beyond the approved 2022 FPM Roadmap for 2022-2024 in the form of new and higher ad valorem excise duties and specific rates.
The excise charge on non-alcoholic beverages, however, remains at N10 per litre.
Green Taxes imposes a 10% excise levy on single-use plastics (SUPs), such as plastic containers, films, and bags.
In addition, an Import Adjustment Tax (IAT) of 2% has been imposed on motor vehicles with displacements ranging from 2000 to 3999 cc, with displacements greater than 4000 cc subject to a 4% tax.
automobiles with less than 2000 cc, public transportation buses, electric automobiles, and locally built vehicles are exempt. The new rules go into effect on June 1, 2023.
Telecommunication Tax: The 2023 FPM confirms the excise charge on telecommunication services previously adopted by the Finance Act 2020 and prescribed in the President-approved Official Gazette No. 88, Vol. 109 on 11 May 2022.
The 5% tax applies to both postpaid and prepaid mobile telephone services (GSM), landline telephone services, and internet services.
Oyedele went on to highlight the issues that have arisen and asked the authorities to take another look at the FPM.
Legality: According to the expert, Green Taxes are not supported by a special statute that provides the legal framework or assigned power for the implementation of the tax, as is the case for beverages and telephone services.
Inconsistency in policy: According to Oyedele, the extra excise taxes represent additional hikes above and beyond the previously agreed rates per the 2022-2024 Roadmap adopted by the 2022 FPM.
“It is policy inconsistency to approve tax rates for a period and then change the rules midway through implementation without compelling reasons or appropriate engagement with the affected industries, particularly at a time when they have suffered significant sales declines due to recent naira scarcity.”
According to Oyedele, there is no evidence that a proper impact assessment was conducted to identify the impact of the additional levies on affected stakeholders across the value chain.
interaction with essential stakeholders: He stated that, contrary to the provisions of the Approved 2017 National Tax Policy, there was no interaction with critical stakeholders, particularly the industries directly affected by the revisions.
Commencement and transition arrangements: At the time of publication, the 2023 FPM had not yet been published in the Official Gazette.
Section 13 of the Customs, Excise Tariff Act states that an Order issued under the law takes effect on the date it is published in the Gazette. The National Tax Policy mandates a minimum of 90 days before tax adjustments are implemented.
Funding: According to Oyedele, the design of the Green Taxes and how the cash generated would be used to fund CO2 net-zero programs are murky.
Compliance requirements: According to the expert, it is unclear how certain of the new taxes, such as the tax base for Green Taxes, frequency of payment, compliance timelines, fines, and detailed regulations to assist tax administration, would be administered.
To prevent the potential harmful implications of the proposed amendments on Nigerians, struggling businesses, and the frail economy, Oyedele suggested that the 2023 FPM be suspended and reviewed.
