The Federal Government has proposed the exemption of small businesses from the payment of Tertiary Education Tax (TET), which is being collected by the Federal Inland Revenue Service (FIRS) in the new draft Finance Bill 2020.
This disclosure was made by the Chairman, Drafting Sub-committee and member of Fiscal Policy Reforms Committee, Mr Ajibola Olomola, at a virtual consultation and stakeholder engagement on Friday to discuss the economic and fiscal policy drivers underpinning the bill.
According to a report from Punch, the Fiscal Policy Reforms Committee which is chaired by the Special Adviser to the President on Economic Matters, Dr. Adeyemi Dipeolu, pointed out that currently, all companies registered in Nigeria are required to pay TET at 2% of assessable profits for each year of assessment.
Mr Ajibola Olomola said the proposal for Finance Bill 2020, “is to introduce an amendment to the Tertiary Education Tax Act, to exempt small businesses from Tertiary Education Tax.’’
He said that this is part of the measures and incentives being introduced by the Federal Government to assist small businesses.
Going further, Olomola said, “The Finance Bill 2020 will include certain provisions that allow the tax authorities to deploy information technology for the collection of taxpayer information of tax and reduce the cost of collection.
“In light of this proposal, stringent rules are also proposed to secure taxpayer confidentiality from unauthorized access by third parties. The Finance Bill 2020 will look to introduce significant penalties for breach of data confidentiality by tax officials.”
Why this matters
This new proposal from the Federal Government comes at a time most businesses especially small enterprises are still battling with the devastating effect of the coronavirus pandemic. This is expected to help mitigate the impact of the VAT rate increase on small vulnerable businesses.
What you should know
Nairametrics had reported that the Federal Government provided some tax incentives to small businesses in the 2019 Finance Bill, which was signed into law by President Muhammadu Buhari. Some of these tax incentives include reducing corporate tax rate from 30% to 20% for MSMEs, with turnover of between N25 million and N100 million per annum, exempting micro-businesses with a turnover of less than N25 million per annum from corporate tax payment.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said that during the 2021 budget presentation, President Buhari indicated that the Finance Bill, “is to support the realization of our 2021 revenue projections and that we will be adopting appropriate counter-cyclical fiscal policies that will enhance the efficiency of fiscal incentives.”