Sunday, February 5

Finance Act: Companies need to be proactive about tax compliance – Olufemi Babem

The increased taxes imposed by the Federal Government through the Finance Act will increase the effective rate of tax on corporate profits by 0.6%.

This was disclosed by Olufemi Babem, an Associate Director in the Tax, Regulatory and People Services Division of KPMG Nigeria, at the Nairametrics Economic Outlook, themed, “Your Money, The Economy and Government Policies.”

During the session titled “Economic Impact of Government’s Tax Revenue Drive”, Babem disclosed that key expected fiscal changes in the act for companies include introduction of deemed taxes for foreign providers of digital goods and services.

What Babem is saying

He stated that with the percentage of deficit to the total 2022 budget expected at 37%, the FG’s focus would be on “tax revenue”, stating that Nigeria expanded the Finance Act to expend tax revenues.

For household incomes, he stated that there would be “no changes to tax rate” however, newer taxes would be introduced for the investing household through increased taxation of capital gains on disposal of shares.

Potential impacts he says will include, Target GDP growth, Increased Government revenue, and also impacts on Nigeria’s Foreign Direct investment and Equities Market.

He said key considerations to look out for include preparation for increased tax authority action, urging a review of business and operating structure to optimize tax positions. He added that companies need to “ensure proactive compliance is taken seriously.”

He also urged that for Nigerians to be involved in the economic policy process through elections, they should get their PVC’s and elect towards their economic interests.

In case you missed it

  • Recall Nairametrics reported earlier that Taiwo Oyedele, Partner, Fiscal Policy Partner and Africa Tax Leader at PwC, stated that the recent change to the Finance Act 2021 which requires Investors on the Nigerian Stock Exchange to pay a Capital Gains Tax of 10% on the sale of shares applicable on the disposal of shares worth N100 million and above, may discourage investment to the capital market and shift focus towards government securities.
  • He also warned that the planned N10 naira per litre tax on sweetened and non-alcoholic beverages (Sugar Tax) as part of its recent Domestic Revenue Mobilisation may see an increase in the retail cost of beverages by 5%