The Nigerian economic space has continued to absorb the shocks of policy misplacement under the present administration. Worse hit by this fluctuationary trend in the growth of the Nigerian economy are the micro, small and medium scale enterprisers. These category of persons are seen as the backbone for accelerating inclusive, robust and sustainable economic growth in any economy. Sadly, most of these pivotal economic drivers who contribute about 47 % to the national GDP and account for about 50 % of the industrial jobs in Nigeria have been plunged into the slippery slope of nothingness due to inadequate financing, multiple tax regimes and infrastructural deficit. Thankfully, with the passage of the Finance Bill into law, small and medium scale businesses and start-up enterprisers in Nigeria can have their hopes renewed.
The Finance Act (2020) is a medley of seven tax legislations to wit; Companies Income Tax Act, Value Added Tax Act, Customs and Excise Tariff (Consolidation) Act, Personal Income Tax Act, Capital Gains Tax Act, Stamp Duties Act and the Petroleum Profit Tax Act. These laws contain different provisions on tax, taxable companies and even their expected responsibilities. The Finance Act seems pregnant with provisions that seek to engineer the overall business environment in Nigeria. A business environment that encourages small and medium scale enterprises, start-ups to conveniently engage in business activities without the burden of tax interference is one of the reasons for the enactment of the Finance Act, to synchronize the various tax provisions in the aforementioned Acts in a bid to make them more responsive to tax reforms and reflect contemporary tax practices in such a way that the interest of companies and SMEs, start-ups are efficiently secured. The Act aims to create an enabling environment for entrepreneurs with innovative, tech-based ideas to start and scale their businesses under a favourable fiscal and regulatory environment. The Act states that small businesses with a turnover of less than N 25 million are to be exempted from Company Income Tax, while it lowers the tax rate for companies making up to N 100 million from 30 % to 20 %. This piece of legislation is poised to encourage SMEs and start-ups in Nigeria to invest more in themselves, become more productive, get more employees and grow to become medium-sized businesses.
The initiative behind this Act is laudable especially the modifications to the fiscal rules around taxation that clearly aims at creating a conducive business environment and alleviating the tax burden for small and medium scale enterprises. This in the long run is expected to encourage growth and development by that sector of the economy through the creation of job opportunities and even credit support for the extremely fledging businesses in Nigeria.
It is hoped that the Finance Act does not pay lip services to the expectation of many start-ups and small and medium scale business practitioners in Nigeria. Reasonable compliance with this Act subject to other provisions of the law, will encourage foreign investors to start up businesses in Nigeria. This in turn will expand the ease of doing business and facilitate rapid economic advancement.
Davidson .I. Obabueki (Esq)