President Muhammadu Buhari’s “parting tax gift” to the populace, according to tax expert Taiwo Oyedele, is the new tax legislation in Nigeria.
At PricewaterhouseCoopers (PWC), Oyedele is the Africa Tax Leader and Fiscal Policy Partner.
Through a circular that was endorsed by Zainab Usman, the minister of finance, budget, and national planning, the federal government recently unveiled new Fiscal Policy Measures (FPM).
Oyedele broke down the new laws and highlighted them in a breakdown on his Twitter.
According to him, the ECOWAS Common External Tariff’s (2022–2026) implementation is related to the Supplementary Protection Measures (SPM).
The modifications go into effect on May 1, 2023, with importers who opened Form M prior to that date receiving a 90-day grace period.
The products on the list are aluminum cans, rice, woven fabrics, ceramic tiles, steel, and containers for compressed or liquified gas.
Others include smart phones, new and used passenger cars, electric generating sets, rotary converters, washing machines, and electricity meters.
Oyedele claims that the applicable duties for the majority of the commodities are unchanged from the FPM rates for 2022.
With effect from 1 June 2023, new excise taxes on alcoholic beverages, tobacco, wines, and spirits that range from 20% to 100% more than previously allowed rates have been established.
These new and higher advalorem excise charges and particular rates represent additional increases over and beyond the 2022 FPM’s authorized Roadmap for 2022-2024.
However, the excise duty rate for non-alcoholic beverages is still N10 per litre.
Single-use plastics (SUPs), such as plastic bags, films, and containers, will henceforth be subject to a 10% excise tax under Green Taxes.
In addition, a new Import Adjustment Tax (IAT) levy of 2% is now applicable to motor vehicles with displacements between 2000 and 3999 cc, while vehicles with displacements over 4000 cc will be subject to a 4% tax.
Electric vehicles, vehicles with less than 2000 cc, buses used for public transportation, and locally produced automobiles are exempt. On June 1, 2023, the new regulations go into force.
Tax on telecommunication services: The 2023 FPM confirms the excise duty on telecommunication services that was previously implemented by the Finance Act 2020 and regulated in the Official Gazette No. 88, Vol. 109 on May 11, 2022, approved by the President.
Mobile (GSM), fixed (telephone), and internet services—both prepaid and postpaid—are all subject to the 5% tax.
Oyedele went on to highlight more issues that have come up and asked the authorities to take another look at the FPM.
Legality: The expert pointed out that unlike, for example, beverages and telephone services, the application of the Green Tax is not supported by a specific statute to give the legal framework or delegated authority.
Inconsistency in the policy: According to Oyedele, the extra excise taxes represent additional hikes over and above the previously agreed rates per the 2022–2024 Roadmap adopted through the 2022 FPM.
“It is policy incoherence to approve tax rates for a period of time and then change the rules halfway through the implementation without any compelling justifications or appropriate engagement with the affected industries, especially at a time when they have experienced a significant decline in sales as a result of the recent naira scarcity,” said the report.
Impact evaluation: In order to ascertain how the additional taxes would effect various stakeholders along the value chain, Oyedele claims that there is no evidence that an appropriate impact evaluation was conducted.
Engagement with key stakeholders, particularly those in the industries that will be most immediately impacted by the revisions, was lacking, he claimed, in violation of the Approved 2017 National Tax Policy standards.
Transition and start-up arrangements: At the time it was released, the 2023 FPM had not yet been officially published in the Official Gazette.
An order made pursuant to a legislation shall be effective as of the date of publication in the Gazette, according to Section 13 of the Customs, Excise Tariff Act. Prior to the introduction of tax reforms, the National Tax Policy stipulates a minimum of 90 days.
Funding: Oyedele pointed out that it is unclear how the money raised by the Green Taxes will be used to support CO2 net-zero efforts.
Requirements for compliance: According to the expert, it is unknown how some of the new taxes will be handled, including the tax base for the Green Taxes, the frequency of payments, the timetables for compliance, the severity of penalties, and the specific rules that will govern the administration of the tax.
Oyedele suggested that the 2023 FPM be halted and reevaluated in order to minimize any potential detrimental effects of the proposed measures on Nigerians, struggling businesses, and the weak economy.
