Real Sector Operators Call For Forbearance – 2021 Finance Act

Operators in the Nigerian real sector have called on the ministry of Finance and Budget Planning to consider a period of moratorium on the implementation of the amendments in the 2021 Finance Act which imposes more tax costs to drive government revenue.

Speaking at the Nigerian Economic Summit Group discussion on “Impact Assessment of the 2021 Finance Act,” operators in the manufacturing sector said, the sector, which is already shrinking due to the harsh economic realities coupled with rising cost of operations, would shrink further if the tax regime is implemented as it is.

The president of the Manufacturers Association of Nigeria (MAN), Mansur Ahmed at the virtual discusssion, stressed the need for government to ensure that ‘the tax burden is not unnecessarily increased.’

Mansur, who called for an engagement between the government and the operators in the Nigerian real sector, said, there ‘is the issue of timing’ in the implementation of the Finance Act.

“As we all know, the last years have been extremely stressful for all operators in the economy, but particularly for the manufacturing sector.

“Not only has costs gone up substantially because of issues with the logistics, the contraction that has taken place and also with the implication of the consequences of the pandemic. For instance, the import of some very critical raw materials has been clearly suppressed in some areas, and I think this should be taken into account.

“We need to ensure that we don’t, perhaps unintentionally continue to increase the tax burden, especially those who are already paying all the taxes that they should,” Mansur stated.

On his part, the vice president and managing director, Coca-Cola Nigeria, Alfred Olajide, noted that, the current tax regime under the 2021 Finance Act is one sided as it does not pose any benefit to the real sector.

Olajide, while noting that the health justification for the sugar tax is not valid as the country’s consumption of five grams is much less than some other with 40 grams, noted that, if implemented under the current economic situation, the food and beverage sector which currently employs more than 1.5 million people, will be forced to further shrink thus leading to job losses.

Explaining that manufacturers are currently facing increased cost in logistics, raw materials, fuelling costs as well as foreign exchange challenges, Olajide said, the industry “requires a period of moratorium before the implementation of the 2021 Finance Act.”

Meanwhile, the MAN president, speaking on the incentives provided in the Act said: “the role of regulators in the management of the incentive system, must be scaled up in terms of its effectiveness and efficiency, but also in terms of the recognition by such regulators that the purpose of these incentives is to promote growth of the relevant sector.

“Regulators should not continue to see their role as gatekeepers for these incentives. I think they should, in fact, be going out to identify operators that actually can benefit from these incentive in a way that benefits the economy generally, and actually ensuring that they understand it.”

In his welcome address, the chairman of the NESG, Mr Sue Ighodalo, noted that, it is expected that the 2021 finance act will consolidate the achievements of the previous act in accelerating non oil revenue generation in Nigeria.

Ighodalo, who was represented by a board member, Nnanna Ude, noted that, while the Finance Act is one of the direct policy tools with the potential domestic revenue mobilisation. “despite its perceived benefits, the Act poses an important policy dilemma, the under limited fiscal space.

“Which poses the question, how much tax revenue can government make to the extent of tax measures do not have an impact on households and does not stifle investment and economic growth. Clearly, there are expected trade-offs emanating from the 2021 Finance Act.

“On one hand the act contains tax measures and tax administration changes that can help the federal government raise more non-oil tax revenues and realise fiscal sustainability. But on the other hand, it introduces some tax increases that may be burdensome for individuals and businesses. Therefore unravelling this dilemma will require an evidence based assessment of the impact of tax measures as presented in the 2021 Act,” he pointed out.