By Merit Ibe
The Lagos Chamber of Commerce and Industry (LCCI ) has kicked against a provision in the Finance Act 2022, which involves capital gains tax at the rate of 5 percent, saying it is an additional cost burden to investors in the capital market.
The chamber, which noted that the possibility of new taxes, tariffs and levies being imposed from 2022 is now real as the President signed the 2021 Finance Bill into law last week, acknowledged the revenue challenges currently facing the government and pledged to support economically viable initiatives to resolve the challenges.
President of the Chamber, Mr Michael Olawale-Cole, who made the assertion yesterday during an address on the state of the nation,noted that having looked at the new changes in the assented Finance Act, it should be noted that both individual income earners and companies, who have paid their income taxes would be subjected to second-level taxation.
There is a provision in the Act that “Capital gains tax at the rate of 5 per cent to be applicable on disposal of shares in a Nigerian company worth N500million or more in any 12 consecutive months except where the proceed is reinvested in the shares of any Nigerian company within the same year of assessment”.
He reckoned that capital market investors have typically surrendered their funds and made them available for investment as such should not be deterred by a reduction in their expected capital gains (which is a critical motivating factor). “With the All Share Index (ASI) at 42,318 in December, capital market deals are just recovering from a very low level of 37,658 as of June 2021.”
Noting that the chamber was not against the re-introduction of the capital gains tax, he said there was need for better timing to allow the market to recover fully before any consideration of taxes.
On the mandatory payment of gross revenue to the federation account by the MDAs, the chamber urged the government to enforce this fully as this will boost government revenue.
He said in doing this, more electronic payment for government services and permits should be encouraged and implemented to plug leakages.
Olawale-Cole urged for caution in the amendment of the Fiscal Responsibility Act to enable government borrow for “critical reforms of significant national impact” (which are not defined).
He said this might lead to abuse of definition of what is ‘significant national impact’.
“Our concerns are founded in the rising debt stocks of the government and wonder what the levels may become when more room is created for more borrowing.
“We need to be considerate of cross-border trade and how this will be affected by the provision that “Non-residents making taxable supplies to recipients in Nigeria to have the primary obligation to charge, collect and remit VAT to FIRS”. The terms should be clearly stated and well understood by all parties involved. By the latest GDP figures from the National Bureau of Statistics (NBS), trade has become one of the growth drivers for the country.”
Beyond the technicalities around the assessment, rates and computation of taxes, the chamber urges governments at all levels to ensure the creation of an enabling tax environment where the tax system is fair, equitable and efficient to make tax payment easy.
President of the chamber emphasised that the Chamber has advocated for the widening of the tax net to capture more qualified taxpayers who hitherto are not paying their taxes.
“ In addition, the World Bank’s recently published Nigeria Development Update recommended that we impose higher taxes on ‘sin’ products or luxury patronized by the rich.
“We have always made a case against the imposition of more taxes on private sector operators who pool resources together to provide almost all their infrastructural needs ranging from water, electricity, technology, etc. “However, since taxes are the main sources of government revenue, we would ask that ongoing tax reforms be sustained to create an efficient tax system that simplifies tax payment and is accepted by all parties as being a fair system. Nigeria’s infrastructural deficit remains a challenge to businesses and the Chamber would advise that immediate interventions be carried out to alleviate the burden of private funding of critical infrastructure. Taxpayers are entitled to know about the utilization of tax revenues. We, therefore, advocate for tax and debt transparency.”