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Analysis of Nigeria’s new set tax laws

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By Usman Oladimeji

Appropriate duties stand at the 2022 FPM levels for most part.

Taiwo Oyedele, a tax expert and the Fiscal Policy Partner & Africa Tax Leader at PricewaterhouseCoopers (PWC), have termed the new tax laws in Nigeria as President Muhammadu Buhari’s “parting tax gift” to the people. The administration had recently introduced new Fiscal Policy Measures (FPM) through a memo signed by the Minister of Finance, Budget, and National Planning, Zainab Usman. Oyedele took to his twitter page to discuss the new legislation in detail, drawing attention to the Supplementary Protection Measures (SPM) that pertain to the enactment of the ECOWAS Common External Tariff (ECT) for the years 2022 through 2026.

Changes with the new law took effect on May 1, 2023, with a 90-day grace period for importers who started a Form M prior to May 1. Oyedele claims that, for the most part, the appropriate duties stand at the 2022 FPM levels. New excise taxes on booze, cigarettes, wine, and spirits ranging from a 20% rise to a 100% increase over previously approved rates will go into effect on June 1, 2023. These additional and higher extra excise charges and particular rates are in addition to the authorized Roadmap for 2022-2024 included in the 2022 FPM.

The expert outlined complications and suggested FPM be reviewed.

Non-alcoholic beverages will continue to be subject to the same N10 per litre excise charge rate. Single-use plastics (SUPs) such as takeaway containers, packaging film and grocery bags will be subjected to a 10% excise tax under the Green Taxes plan. Vehicles with engine displacements between 2,000 and 3,999 cubic centimeters (cc) are subject to a 2% Import Adjustment Tax (IAT), while those with 4,000 cc or above pay a 4% levy. Meanwhile, vehicles with engines of less than 2,000 cc, public transport buses, electric vehicles and vehicles produced in the country at large are exempted. These new regulations will go into effect on June 1st, 2023.

The excise charge on telecommunication services, previously implemented via the Finance Act 2020 and subsequently prescribed in the Official Gazette No. 88, Vol. 109 on 11 May 2022, has been approved by the President and is now in effect under the 2023 FPM. Note that the 5% tax applies to both postpaid and prepaid mobile (GSM) and fixed telephone and internet services. Moreover, the tax expert outlined some complications and suggested that the FPM be reviewed by the proper authorities. Unlike taxes on alcoholic beverages and telecommunications services, he said, the Green Taxes lack a particular statute providing the legal structure or delegated authority for the enactment of the tax.

2023 FPM had not yet been published in the Official Gazette.

Oyedele added that approving tax rates for a period and then changing the rules halfway through implementation without solid justifications or proper interaction with the affected industries is policy inconsistency, especially given the recent naira scarcity, which has caused a significant drop in sales for those industries. He also claims that there is no evidence that a thorough impact assessment was conducted to ascertain how the increased levies will affect affected parties across the value chain.

In contrast to what was required in the Approved 2017 National Tax Policy, he said no consultation was held with relevant parties, including representatives from the industries that would be most impacted by the proposed alterations. Oyedele also voiced discontent with the commencement and transition procedures, noting that the 2023 FPM had not yet been published in the Official Gazette. While the National Tax Policy mandates a minimum of 90 days prior to the implementation of tax changes, Section 13 of the Customs, Excise Tariff Act states that an Order made under the law shall have effect from the date of its publication in the Gazette.

It is uncertain how some of the new taxes will be enacted.

Oyedele pointed out that it is ambiguous how the revenue from the Green Taxes will be used to finance activities aimed at achieving CO2 neutrality. The expert noted that it is also uncertain how some of the new taxes, such as the tax base for the Green Taxes, the frequency of payment, the compliance timelines, penalties, and specific regulations to guide the administration of the tax, will be enacted, with an emphasis on compliance. Ultimately, he suggested that the 2023 FPM should be put on hold and re-evaluated to prevent unintended adverse effects on Nigerians, struggling businesses, and the faltering economy.

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