Oyedele insists tax reforms will boost growth of manufacturing sector

The Federal Government has assured operators in the manufacturing sector that with the implementation of the new tax laws, that some key features and changes in the new tax laws will stimulate inclusive growth and enhance the sector’s competitiveness.

The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele, who gave the assurance at a ‘Hybrid Stakeholders’ Engagement’ themed ‘From Legislative Assembly to Factory Floor: What the New Tax Laws Mean for Nigerian Manufacturers,’ held at MAN House, Ikeja, Lagos, adding that the tax laws offer a set of strategic benefits targeted at boosting the domestic and global competitiveness of Nigerian manufacturers.

Speaking on the theme, Oyedele listed some of the key changes that will significantly benefit manufacturers to include tax exemptions for small companies, reduced compliance for micro-businesses, and incentives for investment among others

Oyedele stated that under the new tax regime, small and medium-scale manufacturers and businesses with an annual turnover of N100 million or less are now fully exempt from Companies Income Tax (CIT).

The Tax Reforms Committee Chair explained that while there is zero per cent CIT for small & medium size companies, in the case for larger firms, the plan is to reduce the CIT rate from 30 per cent to 20 per cent, noting that this will bring Nigeria’s rates in line with global competitive standards.

He also stated that the new tax regime introduced the Economic Development Incentive (EDI) scheme, replacing the older “pioneer status” holidays.

The EDI, he said, offers a five per cent annual tax credit for five years on qualifying capital expenditures, which encourages manufacturers to invest in modern machinery and advanced technology.

According to Oyedele, the new tax laws, also allow manufacturers to recover input Value Added Tax (VAT) on all purchases, including services and fixed assets, adding that this eliminates the previous “hidden cost” of non-recoverable VAT, directly improving cash flow and reducing the cost of production.

He underscored that there is provision for zero-rated essential goods aimed at stimulating demand and supporting social welfare, basic food items, medical supplies, and educational materials.

He announced that Manufacturers in these sectors can now claim full VAT refunds on their inputs while charging zero per cent to the end consumer, making locally produced goods more affordable.

He insisted that the new tax laws were designed to simplify the tax landscape and incentivize production, input VAT on taxable supplies, including services and fixed assets, may be deducted from the output VAT payable, but only to the extent the input tax was incurred for making taxable supplies.

However, he said that the portion relating to non-taxable supplies is not deductible.

Oyedele maintained that Manufacturers are also exempted from VAT on diesel, which currently contributes to their high cost of production, because of the exorbitant cost of diesel.

He explained that the charging and collection of VAT on petroleum products, renewable energy equipment, Compressed Natural Gas (CNG), Liquefied Petroleum Gas (LPG), and other gaseous hydrocarbons may be suspended by an Order from the Minister.

Oyedele hinted that a lot of the tax reforms are targeted at the capital market, stressing that all investors in the stock market are eligible for Capital Gains Tax (CGT) exemption either unconditionally or subject to re-investment.

He emphasized that Withholding Tax (WHT) on bonus shares has also been eliminated.

He also mentioned that there are also provisions for tax exemption for state government bonds, stamp duty exemption for all documents relating to the transfer of stocks and shares, as well as faster and clearer rules for tax offsets and refunds.

The new tax laws, according to the Tax Reforms Committee Chair, will also simplified compliance by making e-invoicing, fiscalisation and real-time reporting mandatory, adding that the transition to a digital, automated e-invoicing system under the Nigeria Revenue Service (NRS) will reduce the administrative burden on tax departments, allowing firms to focus more on core industrial operations.

He stated that every company shall designate a representative(s) to attend to its tax matters provided that a paid agent shall be accredited.

Speaking on the Ombud, he stated that the provision for Tax Ombud is to protect taxpayer rights including moderation of excessive regulatory fees.

Oyedele clarified that the Tax Ombud is an independent and impartial arbiter, to conduct enquiries, institute legal proceedings on behalf of a taxpayer, and act as a watchdog against arbitrary tax policy.

Speaking on the strategic benefits of the new tax laws for Nigerian manufacturers, Oyedele said the tax reform was necessitated by the need to address inequity and promote shared prosperity.

He stated further that the reforms were intended to mend Nigeria’s broken tax system which he described as “fragmented, complex, unconducive for growth, regressive, and a high burden on Nigerians and businesses.”

He cited the implications for investment and growth to include: Reduced business risks; Elimination of min tax on capital; Certainty of tax treatment; Tax ruling, statute of limitation; Lower tax burden; Reduced tax rates; Harmonisation of taxes; Lower WHT & faster tax refunds; Competitive tax regime; Input VAT credits & tax reliefs; Economic development incentive as well as Reorganisation regime, R&D.

He stressed that the reform objectives are designed to usher a regime of fairness, harmonisation, efficiency, ease of doing business, transparency, and economic development.

According to the Tax Reforms Committee Chair, macroeconomic stability and growth, rising investor confidence, harmonisation, and modernisation are already indications that Nigeria is inching closer to realizing the objectives of the reforms.

Oyedele underscored that the reforms are a “bold step” towards a competitive Nigeria, encouraging dynamic engagement from businesses to leverage these changes for growth, better revenue generation, and increased domestic as well as foreign investment.