Following the contentious Tax Reform Bill proposed by President Tinubu last month, which passed second reading in the Senate on Thursday, tax experts are not leaving any stone unturned in ensuring that Nigerians understand its contents to the letter.
At a webinar put together by the Chartered Institute of Taxation of Nigeria (CITN), the Executive Chairman of Kano State Internal Revenue Service (KIRS), Zaid Abubakar, who made a Critical Review of Taxation of Income of Persons under the Proposed Nigeria Tax Bill, 2024, sported some grey areas in the bill.
Abubakar maintained that, though the fiercely debated bill, which comprises 43 clauses and six parts, has been adjudged by the federal government of having the potential to protect small businesses and engender economic growth and development; however, there are much that needed to be addressed to avoid overheating the polity.
KIRS Executive Chairman, explained that where gains accrue to a person on disposal of shares from Nigerian company, it is not clear whether both the proceeds and gains must equal or exceed N150M and N10M respectively to be taxed, or if exemption can be enjoyed, and if either one of the proceed or the gain is below the stated threshold and the other is above.
Moreover, he pointed out that the N150M threshold for asset disposal is high, as most sub -nationals do not have significant number of residents that own such volume of assets. “Section 35(1) while extending the disposal of assets beyond sale, transfer, assignment and compulsory acquisition, to include ‘lease’, did not define the type of – lease- Is it finance or operating lease? What if the -lease- is the ordinary course of business of an enterprise? In essence, the definition of ‘lease’ is too generic.
“The N50M compensation for individuals is a welcome development, especially for those whose integrity has been impaired by libel, etc. The exemption for lands attached to primary dwelling is a further relief for individuals”
He stressed that small companies are not well defined- going by paid up capital, number of employees, or turnover. However reduction in CIT will be welcome development for corporate entities, while the minimum tax rate of 15% is good, but the baseline N208 to qualify for the minimum tax is high.
“The exemption of tax payers at the bottom of the pyramid will bring some relief to the poor. However, it will erode the tax base of most sub -nationals without any compensation. It is not clear what will happen to incomes between N800K to N2.2M bracket. Will they be zero-rated or charged at 15%” he queried.
He posited that, allowing NITDA, TETFUND, and NASENI to rely on budgetary allocations or having a sunset clause for them, will negatively affect the educational and technological advancement of Nigeria.
On Pension, which is included as part of income, he suggested that it should be part of eligible deductions, while there is need to harmonise Section 4(1) and Section 12 in order not to give room for misinterpretations on account derived, brought and received in Nigeria.
“The exemption of employers such as start up, tech-driven services or creatives arts has the implication of denying competent Nigerians the opportunity to compete. The non -inclusion of IPGs brought or received in Nigeria may create gaps in determining total income subject to tax in Nigeria. There is need to align this clause with the ADBR test, as it is in the current Act.
“The failure of Section 17(9d) to include digital space in the meaning of a place is incompatible with the reality of the digital age. Therefore, there is need for a regulation to be issued by the Minister. To him, Assessable Profit as captured in the document was not clearly defined, asking “Is it accounting profit or adjusted profit”?
The expert highlighted that the provision on chargeable gains did not successfully distinguish between gains accruing from assets used in trade, vocation or business with gains from disposal of individual assets.
“Section 30 of the Bill, allows for ‘eligible deductions’ which includes payment made as contributions for National Housing Fund, National Health Insurance scheme, pension, payment for life insurance for the individual or spouse, interest payment on loans for developing an owner occupied residential house and rent relief of 200,000 or 20% of annual rent paid (whichever is lower). This effectively eliminates consolidated relief allowance and minimum tax for individual tax payers,” he added.
Meanwhile, the President/Chairman in Council of CITN, Mr. Samuel Agbeluyi, called on analysts, tax professionals, policymakers, legal practitioners, other experts, and Nigerians at large to tread with caution as reactions towards the tax bill heightened.
He urged tax experts to explain better for Nigerians to understand the direction of the presidency and why everyone should be very careful, bearing in mind the economic storms overwhelming the country at the moment.
