FG Mulls New Tax Exemption for SMEs

The Federal Government is considering another tax exemption for small businesses in the draft Finance Bill 2020.

According to the Fiscal Policy Reforms Committee, put together by the Ministry of Finance, Budget and National Planning and chaired by Dr Adeyemi Dipeolu, the Special Adviser to the President on Economic Matters, the exemption of small businesses from the payment of tertiary education tax has been proposed in the draft bill.

Mr Ajibola Olomola, the Chairman, Drafting Sub-committee and member of Fiscal Policy Reforms Committee, explained that the proposed Finance Bill 2020 “is to introduce an amendment to the Tertiary Education Tax Act to exempt small businesses from Tertiary Education Tax”.

Presently all businesses registered in Nigeria are required to pay Tertiary Education Tax at two percent of assessable profit for each year.

However, in an effort to stimulate new job creation, the Federal Government has been exempting businesses from tax payment. For instance, the Finance Act 2019 introduced companies’ income tax exemption for small businesses.

Therefore, “in line with the Federal Government objective of incentivising small businesses, there is a need to introduce similar exemption for TET,” Olomola said at a virtual consultation and stakeholder engagement on Friday to discuss the economic and fiscal policy drivers underpinning the bill.

Mrs Zainab Ahmed, the Minister of Finance, Budget and National Planning, said the President had indicated in his 2021 executive budget presentation speech that the Finance Bill “is to support the realisation of our 2021 revenue projections and that we will be adopting appropriate counter-cyclical fiscal policies that will enhance the efficiency of fiscal incentives.”

Olomola said, “The Finance Bill 2020 will include certain provisions that allow the tax authorities deploy information technology for the collection of taxpayer information of tax and reduce cost of collection.

“In light of this proposal, stringent rules are also proposed to secure taxpayer confidentiality from unauthorised access by third parties. The Finance Bill 2020 will look to introduce significant penalties for breach of data confidentiality by tax officials.”

He added that “This change corrects an anomaly under the CAMA which extinguishes shareholder’s right to dividend after 12 years and returns the money to the company for redistribution to other shareholders.”