Published by The Tax Club, University of Lagos. on

Held at the Faculty of Law, University of Lagos on Wednesday 4th March, 2020

The Department of Commercial and Industrial Law held a program on the above topic, hosted by the dean of the Faculty, Professor Ayodele Atsenuwa. It was aimed at critically analysing the recently passed Finance Act: the pros, cons and grey areas. Speakers at the event were top lecturers in the University and professionals in the tax world. The program saw in attendance delegates from The Federal Inland Revenue Service (FIRS), CITN, among others.  The speakers include

1. Professor I.O. Bolodeoku

2. Professor Abiola Sanni

3. Dr. Olumide Obayemi

4. Dr. Isaac Nwaogwugwu and;

5. Taiwo Oyedele from PricewaterhouseCoopers (PwC).


The Finance Act was assented to by the President on 13 January 2020 and officially commenced on the same date. Its Gazette copy was made public on 14 January 2020 and the Act was to take effect on 1 February 2020. The Finance Act is aimed at certain objectives given by the President on presentation to the legislature, and these are:

  1. Reformation of Nigeria’s Tax law to align with global best practices;
  2. Promotion of Fiscal equity;
  3. Supporting MSME’s through the ease of doing business initiative;
  4. Encouraging investments in infrastructure and capital markets, and;
  5. Raising government revenue.

    Professor Abiola Sanni answering some of the questions.

The pertinent question Professor Abiola Sanni raised was to what extent will the provisions of the Act achieve these goals?

He highlighted the pieces of legislation amended by the Act and the major amendments made to these Acts. Some of the issues raised include:

  • Commencement date of the Act: Section 2(2) of the Interpretation Act provides that an enactment will come to force on the day such is passed or the day the enactment is made, as long as the date of enactment is not stated. Therefore, is the commencement date 13th of January or 1st February 2020? The Act came into force on the 1st of February 2020. In future Finance Acts, stakeholders should plan ahead to avoid such missteps.
  • Correct Citation: Should the law be cited as the Finance Act 2019 or 2020? Section 57 Finance Act or Section 21(b) Interpretation Act? The current citation is Finance Act 2019.
  • Also, the principal Acts, such as the Value Added Tax Act, retain their citations and do not become modified, such as the Value Added Tax Act 2020.
  • For future purpose, the government should try to engage all stakeholders in the process.
  • The Finance Act is more focused on the Company Income Tax Act and Value Added Tax Act.
  • FIRS should take no time in releasing circulars regarding the Act to aid its interpretation. 
  • Finance Act 2021? This improvement in the Tax world should be annually rather than being a one-time thing.
  • There are loopholes to fill in order to actually raise revenue.
  • The revered professor of taxation also commended the introduction of Tax Identification Number, saying that it will allow the FIRS to view and properly account for all its revenue.

Finally, he urged the citizens to pay their taxes as this will lead to a system where everybody has a sense of ownership and responsibilities. Also, he recognised the little government is doing but urged them to do better. 


Like other areas of taxation law in Nigeria, the Finance Act 2019 has introduced changes to the VAT Act.

  • One of such changes is the basis for liability for VAT. While retaining the basis of liability for VAT as the “supply of all goods and services” other than those exempted, it added the phrase “in Nigeria”. 
  • The Act goes ahead to define when goods and services are deemed to be supplied in Nigeria. This affords much more clarity than what was previously obtainable.
  • The adoption of the phrase “in Nigeria” by the Act muddles up the constitutional issue of the authority of the Federal government to impose VAT. This approach appears to expropriate the States’ powers over VAT in their respective jurisdictions. 
  • If all aspects of the Act are enforced, it shall bring about double taxation due to the liability of the same money to tax under both VAT and the Hotel Occupancy and Restaurant Consumption Law, 2009 of Lagos State. 
  • The Act further expands the definition of goods to include incorporeal property, and so VAT may be imposed on such.
  • Transfer of assets between related businesses shall attract no VAT. These are companies where one is controlled by another or both companies have been members of a recognized group of companies for at least 365 days.
  • Increase in VAT from 5% to 7.5%. 

    Professor Ige Bolodeoku during his presentation.


In 1993, the Personal Income Tax Act was formulated pursuant to the Reports of the Working and Study Groups for the amendment of Nigerian tax laws. In 2007, PITA was one of the Statutes covered by the FIRS (ESTABLISHMENT) Act, meaning that tax appeals under PITA were to be heard by the Tax Appeal Tribunal (TAT) amongst others. In 2011, the Personal Income Tax (Amendment) Act came into force with the introduced: Revised PITA Tax Rate, amendment to terms of employment, among others things.

Dr. Obayemi noted the major and minor changes made to the Personal Income Tax Act (PITA). These major changes include amendments to sections 33, 49 and 58 of the PITA.

  • The requirement of Tax Identification Number (TIN) to open new accounts and operate existing ones. The main obligation for TIN is on business owners. 
  • The use of electronic mail and courier services as valid means of communicating objections against tax assessments to the relevant authority. 

The minor changes include

  • Substitution of ‘Federal Board of Inland Revenue’ for Federal Inland Revenue Service in sections 2(2), 49(1), 86(2)(a)&(8), 102(1), 108(f). This is an amendment which should have come earlier, as it had the effect of preventing the Federal Inland Revenue Service from bringing legal actions in its name, a fatality of not being named in key enabling laws.
  • Insertion of new deductible expenses in sections 20(1)(g) PITA.
  • Deletion of sub-sections (3),(4),&(5) of section 33 on personal reliefs and reliefs for children.

He noted that the consolidated relief allowance introduced in 2011 to replace the old tax-free allowance might not withstand the test of time due to the high inflation rate in the country. Furthermore, the Act fails to consider the taxation of income accruing to individuals who work offshore and the taxation of illegal income. In Botswana, illegal incomes are taxed. Also, there is no amendment of the exemption granted to ecclesiastical, educational and charitable institutions. 

Dr. Olumide Obayemi during his presentation.


“When we pay our taxes, Nigeria will be more organized” 

In his overview of the Nigeria Tax system, Taiwo Oyedele noted the fact that our tax laws are becoming obsolete, with the issue of multiplicity of taxes, administrative inefficiencies among others. Nigeria has a complex tax system and revenue crisis. The tax to GDP ratio is 6%, about the lowest among African countries. Using the year 2019, it was shown that the issues stated above, among others, resulted in budget deficit and unsustainable debts. The revenue budget in the year as against the actual revenue was N7 trillion to N4.8 trillion, the Expenditure budget as against the actual Expenditure was N8.9 trillion to N9.4 trillion and the budget deficit as against the actual deficit was N1.92 trillion to N4.6 trillion. He also noted the fact that states have bigger budget deficit. 

Among the problems he highlighted as facing our tax system is low tax morale among the citizens and the fact that they see nothing wrong with evasion. More than 83% of Nigerians do not see evasion as a wrong act. He buttressed this point by citing the case of a former governor of Jigawa state, Alhaji Saminu Turaki, who was granted bail on the condition that he gets tax payers with ownership of houses around Maitama, Asokoro district of Abuja. The ex governor’s aid was noted to have said that the condition was a difficult one, it was like “granting bail with one hand and taking it back with another hand”. This is to show the level of noncompliance of citizens to taxes and that the few people paying taxes are the poor ones.

The major reason for this is lack of trust in government and tax officials, dissatisfaction with public services, and a complex and corrupt tax collection process. Most people will be willing to pay their taxes if there is security and assurance of improved services. 

Some changes to the Company Income Tax (CIT) include;

  • Small companies with turn over less than N25 million are exempted from paying CIT.
  • Lower CIT rate of 20% to be applied to medium sized companies with turnover between N25m and N100m.
  • Tax exemption for 8 years for companies engaged in Agricultural production.
  • Excess dividend tax is to apply only to untaxed distributions and those not exempted by law.
  • A bonus of 2% for medium sized companies and 1% for large companies is available for the early payment and filing of taxes, and the bonus is to be offset against future taxes.
  • Interest deduction between connected parties’ loan is limited to 30% of EBITDA, and any excess may be carried forward for 5 years.
  • there is a lower withholding tax rate of 2.5% for the construction of roads, bridges, buildings and power plants.
  • Insurance companies may now carry tax losses forward indefinitely while special minimum tax for insurance has been abolished.

Some of the grey areas include; 

  • What is the commencement date of the Act for CIT purpose? For tax returns due after 13th January 2020, the Act will apply.
  • If after applying commencement rule under the old law, should cessation rule under the old law apply in order to recoup double tax paid? No, cessation rule under the new law should apply 
  • Does tax exemption for agricultural production apply to all agricultural businesses? No, this only applies to agricultural production. 

Taiwo Oyedele during his presentation.

Some gaps still exist within the law. Firstly, no definition for “significant economic presence” has been adopted. Furthermore, there is the question of how a profit of one hundred naira may make a small business a medium sized one, and so make such a business liable to tax. The effect of this is that a company’s making of more profit may cause it to ultimately lose more money, and this may stifle growth.


Major Observations 

  1. It could lead to manipulation of Tax Laws and tax accounting, thereby deepening the problems of Tax Avoidance.
  2. Increase in tax rate may be counter productive on welfare objectives of the Finance Act. 
  3. Public borrowing will increase.
  4. The danger lies in the real essence of public borrowing to finance the budget; with the country’s history in corruption, borrowed funds may be diverted for private use.
  5. A new strategy is required for public debt benefit optimisation not envisaged by the Finance Act.
  6. Poverty will deepen, while inequality rises.
  7. The Finance Act is more focused on taxes than fiscal issues.
  8. There should be inclusion of stakeholders for subsequent enactments. 

It is a good effort and gives hope to the nation’s fiscal management.

Dr Isaac Nwaogwugwu

Members of the audience

In conclusion, the program was a really insightful one. The speakers shed more light on some of the confusing aspects of the Finance Act, and they also educated us on some of the deficiencies of the Act. As observed by the speakers, the Act is more focused on revenue collection, than fiscal issues. Also there is the need for an inclusion of more stakeholders for subsequent enactments. Finally, as Taiwo Oyedele said, there’s more to tax than revenue, as it aids data collection which can help in the overall planning of the society. Let’s ensure we pay our taxes, after which we can hold the government responsible. 

The Tax Club, University of Lagos.

The official website of the Tax Club, University of Lagos.

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