The two new Executive Orders and five Amendment Bills approved by the federal government to reduce tax burden on Nigerians has elicited mixed reactions from different stakeholders. Expectedly, some have applauded the move while others think the changes are best cosmetic and may not necessarily address the contending issues, reports Ibrahim Apekhade Yusuf
Despite the different palliative measures put in place by the federal government to ameliorate the recurring challenges of businesses, the latter have remained implacable. However, not to be outdone, the government that is ever forward-looking has not relented thus far.
A recap of executive orders under Buhari administration
A major focus of this administration as stated in the Economic Recovery and Growth Plan is to create an enabling environment for businesses in Nigeria, thus, improving the ease of doing businesses in Nigeria. In February, 2017, the Presidential Enabling Business Environment Council (PEBEC) approved a 60-day National Action Plan which was implemented across Entry and Exit of goods; Entry and Exit of people and Government Transparency and Procurement.
Recently, PEBEC released its results of the implementation of the action plan having achieved 70% of its target – with improved transparency in the public sector being an important achievement.
In this order, federal agencies and ministries are required to publish a complete list of all requirements or conditions for obtaining products and services within the MDA’s scope of responsibility. These are not limited to fees, timelines and processes.
Another important aspect of this order is the issuance of default approvals to applications during instances when government officials fail to respond within stipulated dates. Erring government officers will be subjected to appropriate disciplinary proceedings in accordance with the civil service law and regulations
As part of the order, bottlenecks and delays associated with multiple verifications by different government agencies have been removed as applicants working with the government would be required to provide photocopies of document while the verification of such document would be carried out by the government agencies.
Enter new executive orders
In its desire to address the lingering challenges confronting businesses in the area of operating climate, the Federal Executive Council (FEC) had last week approved two Executive Orders and five Amendment Bills to the country’s tax policies aimed at reducing tax burden on Nigerians and boosting ease of doing business.
Briefing State House correspondents at the end of the Council’s meeting presided over by President Muhammadu Buhari at the presidential villa, Abuja, the Minister of Finance, Mrs Kemi Adeosun said the two approved Executive Orders are: Value Added Tax Act (Modification) Order and Review of Goods Liable to Excise Duties and Applicable Rate Order while the five Amendment Bills include the Companies Income Tax Act (Amendment) Bill and Value Added Tax Act (Amendment) Bill.
Others are Customs, Excise, Tariff ETC (Consolidation) Act (Amendment) Bill; Personal Income Tax Act (Amendment) Bill and Industrial Development (Income Tax Relief) Act (Amendment) Bill.
The minister revealed that the approval followed the presentation of a memorandum to seek the consideration and approval of the Council for the report of the National Tax Policy Implementation Committee on Tax Laws Reform.
It would be recalled that FEC had on Feb. 1, 2017, approved the revised National Tax Policy in order to have a robust tax system that would promote investment and improve revenue for sustainable national development.
This is just as the then Acting President, Professor Yemi Osinbajo last year signed three Executive Orders to improve the budget process of the country, support the implementation of the Local Content policy in public procurement and promote transparency and efficiency in the business environment.
Adeosun maintained that the new tax policies would remove obsolete, ambiguous and contradictory provisions in the laws, increase government revenue and simplify the process of paying taxes and doing business.
“Majority of the provisions approved today are actually removing the tax burden and clarifying obsolete and ambiguous areas of tax. So for example for VAT there is to be exemption for residential property, leases on rental, transport for the general public and life insurance.
“These are areas that previously were VAT-able and what was approved today was that these areas should be removed, then, they shouldn’t be subject to VAT.
“In the short term of course that means a revenue lost for government. But we think in the long run that is the right thing to do is improving ease of doing business and reducing the tax burden on our people which is really one of the objectives of this government,’’ she explained.
She disclosed that the government was proposing an amendment to the Company Income Tax aimed at reducing the Right of Tax on Micro, Small and Medium Enterprises (SME) from 20 per cent to 15 per cent.
She said the proposal when approved would also promote Micro, Small and Medium Enterprises and protect most vulnerable persons in the society
Adeosun also revealed that the Council approved N1.6billion for the procurement of 68 anti-smuggling vehicles for the Nigeria Customs Service.
“The operational vehicles currently available for the NCS are grossly inadequate for effective anti-smuggling activities.
“The need to effectively patrol the borders of the country, enhance Customs’ bid to suppress smuggling and increase revenue collection gave rise to the request to purchase 68 operational vehicles,’’ the minister added.
Reaction by OPS
Expectedly members of the organised private sector have expressed confidence in the Executive Orders.
The organised private sector believes that the new executive order has the capacity of attracting new manufacturing investments and raise capacity utilisation in the country given that the pillars take patronage of locally made products and efficiency of the business environment seriously.
Citing the impact of the recently signed an executive order on Ease of Doing Business in the country, the National President of Lagos Chamber of Commerce and Industry (LCCI) Chief Nike Akande, noted that the Nigerian economy had improved tremendously in recent times, attributing it to the series of new policy initiatives of President Buhari.
She said, “We are delighted to observe that the short to medium term outlook for the Nigerian economy is much better than what it was this time last year. This is the outcome of the series of new policy initiatives, engagements, and consultations with key stakeholders and some positive developments in the external sector.”
If properly implemented, these measures will bring considerable relief to the business community, she stressed.
Also speaking on the executive orders, the President of Manufacturers Association of Nigeria, Dr. Frank Jacobs in his assessment of the performance of the administration vis-à-vis impact on the manufacturing sector, he said the current administration above average.
“My assessment principally focuses on the crafting of robust economic policies, relative stabilisation of foreign exchange rate, massive infrastructure upgrade, efforts aimed at improving the ease of doing business, improved consultation and partnership with the private sector to mention but a few.”
Understandably, the administration was compelled to take strict measures to stabilize the economy, particularly in 2016 which was the year the economy was thrown off-balance and into recession with four straight negative quarterly growth rates of -0.36% in Q1; -2.06% in Q2; -2.24% in Q3; and 1.30% in Q4. In that year, many business activities including manufacturing slowed significantly recording lower capacity, output, revenue and huge profit losses. However, as the economy exited recession and stabilised in 2017, businesses are beginning to gain momentum while manufacturing is gradually rebounding.
Economic Recovery and Growth Plan (ERGP) which guided the economy out of recession; Adoption of the Nigerian Industrial Revolution Plan (NIRP) and the Inauguration of the Nigerian Industrial Policy and Competitiveness Advisory Council; Establishment of Presidential Enabling Business Environment Council (PEBEC) which improved Nigeria’s ranking in Ease-of-Doing-Business (EODB); The Federal Government Executive Order 003 and 005 which promotes patronage of made in Nigerian goods by Ministries, Departments and Agencies (MDAs).
The Association, he noted appreciates the government at different fora for the continuous improvement in the Ease of Doing Business in the country.
He was however quick to add that the various challenges that still interplay in the operating environment.
He therefore urged the government to sustain the use of moral suasion to banks to give priority FX allocation for raw-materials, spare parts and machinery to the industrial sector so as to improve production.
Besides, he suggested the implementation of the Steve Oronsanye Report on the reduction and re-alignment of government agencies and parastatals in order to streamline the number of taxes, levies, fees and administrative charges payable to them; Ensure the operability of Independent Power Producers (IPP) for On/Off grid power generation and the Micro Grid Initiative Engage in Public Private Partnership (PPP) programme through the establishment of Concession Agreements under Built-Operate-Transfer (BOT) in road construction and maintenance, rail construction and maintenance with credible organisations.
He also urged the government to set up a formal structure for the private-public sectors to jointly monitor and evaluate the implementation of Executive Orders 003 and 005 of the federal government on the patronage of made in Nigerian goods by Ministries, Department, and Agencies (MDAs) of the government as production without sales would not translate to improved performance.
In a related development, the Chairman, Toiletries and Cosmetic Manufacturers Group, Manufacturers Association of Nigeria (MAN), Ikeja Branch, Ikpong Umoh, at a lecture organised by Financial Business Team on making the port environment more business friendly criticised the incidence of multiplicity of regulatory agencies, which has continued to escalate the cost of doing business.
He said until the agencies are fully harmonised into a single platform, it will mar the executive order on the ease of doing business. On the compliance level, Umoh said some government agencies are yet to adhere to basic operational principles, noting that they are still defaulting by providing dysfunctional contact telephone lines, and emails that are not working.
Prompt and unencumbered communication between agencies of government and the business community, he said, is critical to easing the business environment. Umoh advised service providers to come out clean and rectify the avenues of communication in order to comply with the ease of doing business initiative by reducing human contact in port areas.
The Founder, National Association of Government Approved Freight Forwarders (NAGAFF), Dr. Boniface Aniebonam, expressed concern that the agencies of government are not working in sync with each other, adding that collapse of the ports system is imminent based on the present state of the port system.
A divergent view
In the view of Omooba Olumuyiwa Shosanya, founding president, Association of National Accounts of Nigeria (ANAN) although the federal government has taken some measures, there certain areas that need improvements.
According to him, “What the government must face squarely is to boost its revenue generation capacity. One can say oil has been our fortune as well as our misfortune because we relied solely on oil and neglected the non oil revenue sectors like agriculture and taxation. In most of the developed and emerging economies of the world, taxation has been their main revenue generation stream. But in Nigeria, taxation revenue generation is poor. We still don’t generate up to 10%. Now they have done, especially the Ministry of Finance, is what I would call fire brigade approach to revenue generation.”
The Voluntary Asset and Income Declaration Scheme (VAIDS), he recalled, “Is a temporary measure to aid revenue generation. You’re targeting the rich people who have been evading tax. In taxation what you’re doing is back duty. The money they would have paid in the past, you’re trying to realise it. But that would stop because you’re only targeting the wealthy people, who are just about half a million out of the 180million population. What happened to the about 179 plus?” he queried.
“There is a veritable tax system which all the developed countries are using to raise money- it’s the value added tax. But unfortunately, the VAT in Nigeria is not realising up to 5% of its capacity. The burden of administering the VAT is on the Federal Inland Revenue Service (FIRS), which unfortunately doesn’t have the capability to manage it. So we suggested through policy briefs on revenue generation with emphasis on the VAT but it hasn’t seen the light of day. Taxation through VAT is the most simple revenue generation stream. What you need to have is information about the chargeable person which are the businesses, you’ve to get them registered. They should decentralise collection of the VAT. Let each of the states administer the VAT. That way, you’ll get more chargeable persons, more companies, more traders into the tax net. At the end of the day whatever is realised on monthly basis goes into a central account. From our working documents VAT would be generating over N900billion every month. As of now, what is being generated by the FIRS is less than N80billion, which is less than 10% of what should be generated if the administration of VAT is decentralised. Besides, we can go ahead again to establish Ministry of Taxation and Revenue with a cabinet minister at the helms of affairs while the states can have Commissioners for Taxation and Revenue as the case may be. It has happened in this country before during Shehu Sagari’s regime, we had Ministry of Taxation. We have a veritable revenue generation mechanism that has been abandoned. As far as l’m concerned, the VAIDS initiative is a one-off thing but if the VAT is well administered and decentralised, it will ensure a steady stream of income into government coffers. Based on our projection we can generate at least N9trillion from VAT administration alone. That way we don’t need to execute our budget; it’s possible.”