Nigeria: Tinubu Suspends 5% Tax On Telecom Services, Import Tax On Vehicles, Others

(file photo).

Mr Tinubu will not exacerbate the plight of Nigerians, a statement said.

President Bola Tinubu has suspended the newly introduced Green Tax through Excise Tax on single-use plastics, including plastic containers and bottles.

The President has also signed an Executive Order suspending the "5% Excise Tax on telecommunication services as well as the Excise Duties escalation on locally manufactured products."

Dele Alake, Special Adviser to the President on Special Duties, Communications and Strategy, released a statement Thursday that Mr Tinubu also ordered the suspension of the Import Tax Adjustment levy on certain vehicles.

The statement noted that Mr Tinubu issued these orders to ameliorate the negative impacts of the tax adjustments on businesses and chokehold on households across affected sectors.

"His Excellency will not exacerbate the plight of Nigerians," he said.

The statement noted that the Tinubu Administration has since noticed that some tax policies are being implemented retroactively with their commencement dates, in some instances, pre-dating the official publication of the relevant legal instruments backing the policies.

This lacuna has created some challenges in implementation, Mr Alake said.

"Indeed, the intentions behind upward adjustments of some of these taxes are quite noble. They were designed to raise revenue and address environmental and health issues.

"However, they have generated significant challenges for and elicited serious complaints amongst key stakeholders as well as in the business community," the statement said.

Based on the new executive orders, the Finance Act (Effective Date Variation) Order, 2023, has now deferred the commencement date of the changes contained in the Act from May 23, 2023, to September 1, 2023. This is to ensure adherence to the 90 days minimum advance notice for tax changes as contained in the 2017 National Tax Policy, the statement said.

Similarly, the president signed the Customs, Excise Tariff (Variation) Amendment Order, 2023.

"This has also shifted the commencement date of the tax changes from March 27, 2023, to August 1, 2023, and also in line with the National Tax Policy," it said.

Background

In an effort to entrench a robust and efficient tax system in Nigeria, the National Tax Policy (NTP) was first published in 2012.

Four years later, former Finance Minister Kemi Adeosun, in 2016, set up a committee to review the policy to accommodate new strategies that will complement the government's objectives of creating an enabling business environment and simple tax system.

Based on this, Nigeria's Federal Executive Council (FEC) in 2017 approved the revised NTP, following recommendations of the NTP Review Committee.

According to the former minister, the main objective is to guide the operations of Nigeria's tax system and provide clear implementation and monitoring strategies for stakeholders in the system.

Challenges

On Thursday, Mr Alake noted that the government has identified "some problems" in the tax changes.

He said the 2017 NTP prescribes a minimum of 90 days' notice from the government to tax-payers before any tax changes can take effect, but it still needs to be complied with.

"However, both the Finance Act 2023 and the Customs, Excise Tariff Order 2023 did not give the required minimum notice period, thus putting businesses in violation of the new tax regime even before the changes were gazetted," the statement said.

According to the statement, the 90 days notice is a global practice with a view to giving taxpayers and businesses reasonable time to adjust to the new tax regime.

Mr Alake said many affected businesses are already contending with the rising costs, falling margins and capacity underutilisation due to the various macroeconomic headwinds and the impact of the Naira redesign policy.

While reiterating that Excise Tax increases on tobacco products and alcoholic beverages from 2022 to 2024, which had already been approved, are also being implemented, he said a further escalation of the approved rates by the current administration presents an image of policy inconsistency and creates an atmosphere of uncertainty for businesses operating in Nigeria.

"The Excise Tax of 5% on telecommunication services has generated heated controversy. There is also a lack of clarity regarding the status of this tax, just as players in the sector also complain about the imposition of multiple taxes on their operations," the statement said.

Mr Alake explained that the Green Tax, including the Single Use Plastics tax and the Import Adjustment Levy on certain categories of vehicles, require more consultation and a holistic approach to the country's net zero plan in a manner that does not impact the economy negatively.

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