The Nigerian Senate on Tuesday held a public hearing to consider a new Finance Bill.
The public hearing was organised by the Senate Committee on Finance.
The bill which was presented to the National Assembly by President Muhammadu Buhari in October seeks to increase the value-added tax (VAT) from five per cent to 7.5 per cent.
The bill also seeks to reform the tax regime by amending several Acts, namely Petroleum Profit Tax Act (PPT), Customs and Excise Tax Act, Company Income Tax Act (CITA), Personal Income Tax Act, Value Added Tax Act, Stamp Duties Tax Act, and Capital Gains Act.
The senators had on November 6, passed the second reading of the tax bill despite not being fully aware of its content.
No copies of the bill were shared to senators to allow for any meaningful contribution before it was debated and passed.
For the pubic hearing, stakeholders were invited to discuss their reservations and their recommendations about the bill. Details of the bill were also made available to all the invited stakeholders.
Invited stakeholders included the Minister of Finance, Hadiza Ahmed; representatives from the Chartered Institute of Taxation of Nigeria, Manufacturers Association of Nigeria; Shell Petroleum Development; Chevron; Petroleum Equalisation Fund among others.
While many commended the provisions of the bill, others had a few reservations.
Razak Ogunlaja, who represented the Manufacturers Association of Nigeria, said manufacturing plays a great role in the GDP of the country.
He said for any increase in VAT levied on luxury goods, "there is the need to harmonise taxes, levies, fees payable by businesses in the country to attract more investment."
This, he said, will translate to higher productivity and more tax revenue for the government in the medium and long run.
"The definition of stamp duty for electronic money transfer with the attendant N50 charge for transactions amounting to or greater than N10,000... we feel this will constitute a contradiction as it will reverse the government's cashless policy that is already gaining ground.
"If this must be implemented, the N50 stamp duty should be charged on transactions amounting to N100,000 and above.
"That way, we will not be putting too much burden on the low-income earners," he said.
The Institute of Chartered Accountants of Nigeria (ICAN) said the intended amendments to various sections of the Company Income Tax will generate more revenue for the government as well as support Small and Medium Scale Enterprises(SMEs) through applicable tax reductions.
The institute said encouraging SMEs will go a long way in lifting a huge percentage of the Nigerian populace out of poverty.
The amendments would further improve the level of transparency and accountability in and among corporate entities, if implemented effectively, it added.
The institute also agreed with a part of the bill that supports insurance companies to carry tax losses indefinitely and the abolishment of Special Minimum Tax for insurance companies.
The Chairman of the Governing Council of ICAN, Nnamdi Okwuadigbo, said the proposal to increase the penalty for non-compliance in tax payment is appropriate, "but there should be incentives for compliance such as tax rebate and tax holiday".
"To encourage compliance, the country's tax system should be made more transparent and government at all levels should give an appropriate account of the revenue from the tax," he said.
He also said the implementation of Stamp Duty in Nigeria is not clearly defined nor understood by a majority of the citizens.
"The Stamp Duty in Nigeria shows a high-level multi-taxing process in its implementation. Although Stamp Duty policy will enhance revenue generation, however, its impact on economic growth, fairness and equity is debatable."
In a separate remark, the Chairman of the Oil Producers Trade Section (OPTS), Paul McGrath, recommended the adoption of globally-accepted industry practice of exempting intra-company at-cost services.
He said the bill should also provide guidelines for the determination of what constitutes significant economic presence.
Sections 35 & 38 expand the definition of Services for VAT purposes and introduce VAT Reverse Charge on Imported Services.
These provisions, he said, have broadened the definition of services to "the services provided to a person in Nigeria, regardless of whether the services are rendered within or outside Nigeria."
"With this expanded definition, invoices and similar transactions will be subject to Nigerian VAT of 7.5 per cent. Beneficiaries of such services will now be required to self-account for VAT.
"OPTS is concerned that this amendment will widen the operating expenses base, thus, increasing industry operational costs. Again, OPTS recommends the adoption of a globally-accepted industry practice of exempting intra-company at-cost services."
One of the laudable objectives of the Nigeria Economic Reform Growth Plan (ERGP), he explained, is building a competitive economy through improving the Nigerian business environment.
He said some of the proposed amendments would defeat this objective.
"It is our view that additional taxes, such as those proposed in the bill, will further increase our costs and tax burden, thereby constituting another significant challenge to Nigeria's attractiveness for new investment.
"It will further erode Nigeria's competitiveness in the global oil and gas industry to the advantage of other countries. Nigeria is currently struggling to attract investment in the oil & gas sector, having received only three per cent out of the 73 billion dollars of major project investments in Africa from 2015 to 2019.
"It is our view that we should address taxation within a holistic fiscal package consistent with FGN's objectives of sustainable long-term growth," he said.
Meanwhile, the chairman of the committee, Solomon Adeola, has promised that the panel will consider all the recommendations made before the bill is read for the final time and passed.