The president, Muhammed Buhari signed the Nigerian tax and fiscal law (amendment) bill 2019 also known as the finance bill on 13th of January 2020. An announcement was made through his twitter page. The Bill seeks to align domestic laws with global best practices and support the growth of businesses, particularly early-stage firms.
Other objectives include increasing government revenues and stakeholder presence in investment/capital market. Let us use Ajoke, a baker as an example today. Ajoke’s beautiful doughnut store starts buzzing from as early as 7 AM till 3 PM when her doughnuts get cleared out. The people love the juicy taste, but she’s been worried that the new tax laws will affect her sales.
Today’s for the Ajokes who have struggled with understanding how the new bill affects them. We’ll share her story and break things down for you too. The first worry of Ajoke was the requirement to register her business and get her tax identification number (TIN) to keep her business 66666643 account running. She reached out to a supposed friend who billed her NGN120,000!
Therein lies the first strength and threat of the new bill. It will nudge more business owners to come into the official tax net. On the other hand, due to lack of proper information, some will be extorted. Unsurprisingly, the result of extortion is evasion. People try to hack their way around extortion by avoidance. For the record, the business registration and TIN generation can be done online.
The second worry she had was corporate tax. She racked her head about how a small business like hers will start paying heavy amounts in tax. Her business is flourishing but it still rakes in below 10 million per annum. Thankfully, another strong incentive of the bill is the remittance barrier. As a business owner, she doesn’t get to remit taxes till you cross 25 million in annual revenue. Awesome news!
Ajoke’s worries aren’t over yet though. Despite the juicy offerings, she sees one weakness in the bill — an increase in the Value Added Tax (VAT). Even though the new VAT is still the lowest in Africa, she believes it will affect demand. Interestingly, the bill exempts a couple of items she’ll make use of — milk, cooking oils and cereals. Hence, despite the increase from 5% to 7.5%, all her cost items wouldn’t fly up.
Finally, Valentine is around the corner and she wants to make some amazing doughnuts but she believes the stamp duty charge might slow things down. Here’s what we think Ajoke can do, she can create box offerings with prices that cap at N9,999. Why? The stamp duty is now applicable to only transactions that amount to N10,000. Do you think this is smart? Share with us.