Most analysts in the nation’s economic space have endorsed the just enacted Finance Act 2020 in view of its great potential to transform the nation’s economy and reposition it on the path of sustainable growth in the years ahead.
The support was confirmed in a survey by leading professional services firm, PwC Nigeria, during its executive roundtable on the Finance Act 2020 and Economic Outlook for 2021 held on Monday, which was targeted at CEOs, C-Suite executives and MSMEs and focused on the impact of changes to existing laws by the Finance Act 2020 and other significant government policies to businesses and taxpayers in Nigeria.
The PwC survey showed an overwhelming 92% public support for Nigeria’s Finance Act 2020
In his welcome remarks, Uyi Akpata, Country Senior Partner PwC Nigeria, noted that considering the impact the pandemic is having on Nigeria’s economy, it was important for businesses to understand the forces shaping Nigeria’s economy in 2021. That this knowledge will help them minimize potential risks and take advantage of the fiscal policies the government had enacted to stimulate the recovery of the Nigerian economy.
While delivering the keynote address on the economy and government’s policies towards the recovery, the Minister of Finance, Budget & National Planning, Mrs. Zainab Ahmed, emphasized the administration is committed to enabling economic recovery and stimulating inclusive growth through policies and interventions designed to foster economic resilience and business sustainability.
Thus, the Finance Act 2020 is aimed at supporting vulnerable households and businesses while improving fiscal discipline and procurement efficiency, enhancing economic competitiveness, encouraging domestic investors and enhancing macroeconomic stability amid the challenges posed by the COVID19 pandemic.
On his part, Andrew Nevin, Partner and Chief Economist PwC Nigeria listed the 10 themes that policymakers and businesses needed to consider in 2021 for Nigeria to find its development path as including, unlocking Nigeria’s vast dead assets to stimulate growth; harnessing the Power of the Diaspora; driving export growth through services; and the need for growth to be spread across the country, and not just in a few urban centres.
Others are improving on the country’s low investment and gross capital formation; moving its thriving informal sector to the formal sector; improving on the business environment, and ease of doing business; addressing Nigeria’s big 3 distortions (exchange rate, power, and subsidies); shifting its focus from the Gross Domestic Product (GDP) lens to Sustainable Development Goals (SDGs) and prioritising climate change.
Out of the 10 themes, another important theme to consider is Nigeria’s gross Fixed Capital Formation, which in 2019, stood at less than 20%, with PwC estimating that Nigeria would need an investment rate of at least 26% – 28% of GDP to achieve 7% growth.
Nigeria’s economy, the Chief Economist further noted, is distorted by the exchange rate; fuel subsidy regime; and the power sector. Addressing these three big distortions will be taking the giant step to restructure the country’s economy holistically; achieve the 7% GDP growth, and improve the lives of the average Nigerian.
Taiwo Oyedele, Fiscal Policy Partner and West Africa Tax Leader PwC Nigeria, who shared insights on how the Finance Act 2020, and other significant changes that have been made to existing laws, will shape Nigeria’s tax environment in 2021 noted that there were no easy choices or a silver bullet given the limited fiscal space for incentives and to deliver on counter-cyclical measures.
He commended the policy direction of the government not to introduce new taxes or increase the rate of existing taxes. While commending the government for the reduction in minimum tax rate, he advocated for a permanent removal of the tax which often tax companies that are vulnerable especially when they are loss making.
Providing the results of the survey conducted by PwC, Oyedele disclosed that respondents were also asked to indicate which changes in the Act they did not agree with. Over half (59.7%) said they did not agree with the idea of transferring unclaimed dividends and dormant account balances to a Trust Fund. 31.2% do not agree with the plan to introduce excise duty on Telecommunications services followed closely by 30.3% who do not agree with the deployment of Technology by FIRS to plug into taxpayers systems.
Respondents were also asked to indicate which 3 initiatives they would support the government, to fund the budget deficit and cater for the various tax reliefs. 67.8% voted for the use of technology to catch tax evaders and aggressive tax avoiders.
This appears to be in contrast with the small but significant percentage of respondents who do not want technology deployed into taxpayers systems. 62.2% of respondents will support public procurement efficiency and fiscal responsibility by Ministries, Departments and Agencies of government while 46.3% of respondents said they would support the taxation of foreign companies under the Significant Economic Presence and new VAT rules.
Although only 36.9% of respondents agreed that the Act addressed their business challenges, an overwhelming majority (92.2%) support the Finance Act 2020.
Other speakers at the roundtable were Mr. Sam Nwanze, CFO Heirs Oil & Gas and Mrs. Amal Hassan, Founder and CEO, Outsource Global Technologies; who gave their perspectives on the Act and the implications for large entities and SMEs respectively.