PwC Nigeria, has held its executive roundtable on the Finance Act 2020 and Economic Outlook for 2021.
The virtual event which took place Monday, was targeted at Chief Executive Officers, C-Suite executives and Micro Small and Medium Enterprises (MSMEs) and focused on the impact of changes to existing laws by the Finance Act 2020 and other significant government policies, to businesses and taxpayers in Nigeria.
In his welcome remark, Country Senior Partner PwC Nigeria, Uyi Akpata, noted that considering the impact the Covid-19 pandemic was having on Nigeria’s economy, it was important for businesses to understand the forces shaping Nigeria’s economy in 2021.
He said, this knowledge will help them minimise potential risks and take advantage of the fiscal policies the government had enacted to stimulate the recovery of the Nigerian economy.
While delivering the keynote address on the economy and government’s policies towards the recovery, Minister of Finance, Budget & National Planning, Mrs. Zainab Shamsuna Ahmed, said the administration is committed to enabling economic recovery and stimulating inclusive growth through policies and interventions designed to foster economic resilience and business sustainability.
She maintained that the Finance Act 2020 is aimed at supporting vulnerable households and businesses while improving fiscal discipline and procurement efficiency, enhancing economic competitiveness, encouraging domestic investors and enhancing macroeconomic stability amid the challenges posed by the COVID19 pandemic.
Partner and Chief Economist PwC Nigeria, Andrew S. Nevin while noting 10 themes that policymakers and businesses need to consider in 2021, he said Nigeria must as a priority find its development path.
According to him, achieving this will include finding innovative ways to act on, unlocking Nigeria’s vast dead assets to stimulate growth, harnessing the Power of the Diaspora, driving export growth through services, the need for growth to be spread across the country, and not just in a few urban centres, improving on the country’s low investment and gross capital formation, moving its thriving informal sector to the formal sector, improving on the business environment, and ease of doing business and addressing Nigeria’s big 3 distortions (exchange rate, power, and subsidies).
Nigeria holds as much as $900 billion worth of dead capital in residential real estate and agricultural land. The value of the federal government’s abandoned properties alone, according to the Nigerian Institute of Builders, is projected to be about N230 billion. And about a half of Nigeria’s population live in cities, of which almost 80per cent of them are living in substandard conditions. Finding the political will to act and unlock Nigeria’s dead real estate assets will have a transformative impact on the lives of Nigerians.
Out of the 10 themes, another important theme to consider was Nigeria’s Gross Fixed Capital Formation, which in 2019, stood at less than 20per cent And PwC estimates that Nigeria would need an investment rate of at least 26per cent – 28per cent of Gross Domestic Product (GDP) to achieve 7per cent growth.
Nigeria’s economy, the Chief Economist further noted, is distorted by the exchange rate; fuel subsidy regime; and the power sector. Addressing these three big distortions will be taking the giant step to restructure the country’s economy holistically; achieve the 7per cent GDP growth, and improve the lives of the average Nigerian.
Fiscal Policy Partner and West Africa Tax Leader PwC Nigeria, Taiwo Oyedele who shared insights on how the Finance Act 2020, and other significant changes that have been made to existing laws, will shape Nigeria’s tax environment in 2021 noted that there were no easy choices or a silver bullet given the limited fiscal space for incentives and to deliver on counter-cyclical measures.
He commended the policy direction of the government not to introduce new taxes or increase the rate of existing taxes.
While commending the government for the reduction in minimum tax rate, he advocated for a permanent removal of the tax which often tax companies that are vulnerable especially when they are loss making.
Providing the results of the survey conducted by PwC, Taiwo Oyedele revealed that respondents were also asked to indicate which changes in the Act they did not agree with.
According to him, over half 59.7pee cent said they did not agree with the idea of transferring unclaimed dividends and dormant account balances to a Trust Fund. 31.2per cent do not agree with the plan to introduce excise duty on Telecommunications services followed closely by 30.3per cent who do not agree with the deployment of Technology by the Federal Inland Revenue Service (FIRS) to plug into taxpayers systems.
Respondents were also asked to indicate which three initiatives they would support the government, to fund the budget deficit and cater for the various tax reliefs.
He said, 67.8per cent voted for the use of technology to catch tax evaders and aggressive tax avoiders, adding that this appears to be in contrast with the small but significant percentage of respondents who do not want technology deployed into taxpayers systems.
Also, 62.2per cent of respondents will support public procurement efficiency and fiscal responsibility by Ministries, Departments and Agencies (MDAs) of government while 46.3per cent of respondents said they would support the taxation of foreign companies under the Significant Economic Presence and new Value Added Tax (VAT) rules.
Although only 36.9per cent of respondents agree that the Act addresses their business challenges, an overwhelming majority (92.2per cent) support the Finance Act 2020.
Other speakers at the Roundtable were Mr Sam Nwanze, CFO Heirs Oil & Gas and Mrs Amal Hassan, Founder and CEO,Outsource Global Technologies who gave their perspectives on the Act and the implications for large corporates and SMEs respectively.
