By Juliana Taiwo-Obalonye
President Bola Tinubu, on Thursday, July 6, 2023, unveiled his administration’s maiden Executive Orders (EOs) aimed at strengthening the nexus between tax administration and economic development, to create an enabling business environment. Tinubu is driving policy reforms to reposition the economy and create an inclusive, people-focused business environment.
The four EOs unveiled at a media conference in State House, Abuja, Thursday, July 6, by the Special Adviser, Special Duties, Communications and Strategy, to the President, Dele Alake, disclosed reasons for the President’s intervention to realign the EO on the Customs and Exercise Order signed by former President Muhammadu Buhari on May 8, 2023, that imposed certain categories of taxes on goods manufactured in the country and the Finance Act 2023 signed into law on May 28, 2023.
Other presidential aides at the briefing with Alake included a member of the Presidential Policy Advisory Council (National Economy), Doris Uzoka-Anite; Special Adviser Revenue, Zachaues Adedeji, and Special Adviser to the President on Finance, Adenike Laoye.
Alake listed the Executive Orders thus: “The Finance Act (Effective Date Variation) Order, 2023, has now defered the commencement date of the changes contained in the Act from May 23, 2023, to September 1, 2023. This is to ensure adherence to the 90 days minimum advance notice for tax changes as contained in the 2017 National Tax Policy.
“The suspension of the Customs, Excise Tariff (Variation) Amendment Order, 2023. This has also shifted the commencement date of the tax changes from March 27, 2023, to August 1, 2023, and in line with the National Tax Policy 2017.
“An order suspending the 5% excise tax on telecommunication services as well as the excise duties escalation on locally manufactured products.
“Suspension of the newly introduced Green Tax by way of excise tax on single-use plastics, including plastic containers and bottles. Additionally, the President has ordered suspension of Import Tax Adjustment levy on certain vehicles.”
According to Alake, the four EOs signed by Tinubu address the lacuna in the order on the Customs and Excise Order that imposes certain categories of taxes on goods manufactured in the country. Additionally, the second order defers commencement date for the Finance Act 2023 signed into law by Buhari on May 28, 2023, a day before the expiration of his tenure as President though implemented retroactively, against the provisions of 2017 Finance Act, that stipulates that taxpayers must be given a minimum of 90 days’ notice to enable readjustment in their internal process.
He noted that the May 8, 2023, Order introduced new excise duty on single-use plastics, higher excise duties on some locally manufactured products, including alcoholic beverages and tobacco products, and the Green Tax by way of import tax adjustment on certain categories of imported vehicles.
Since the order was signed by Buhari May 8, and last-minute signing of the Finance Act 2023 on May 28, a day before his departure, several industry stakeholders continue to protest the retroactive implementation of the policy and non-compliance with extant regulations contained in the Finance Act 2017, which mandated government to ensure that appropriate notices are given to taxpayers. Another complaint is multiple taxes, a recurring issue in the public debate on fiscal policy instruments under Buhari’s administration. The Manufacturers’ Association of Nigeria (MAN) and other groups had been in the forefront of engaging government on the impact of multiple taxation on capacity utilisation, employment generation and ease of doing business in Nigeria.
Alake noted in this regard thus: “As a further demonstration of the avowed commitment of President Bola Ahmed Tinubu to constantly dialogue with Nigerians and lend a listening ear, upon taking over the reins of government, the President promised to run a government that will not make life difficult for Nigerians or asphyxiate corporate entities; despite challenges, the Federal Government is irrevocably committed to this pledge.
“You will all recall that prior to the advent of this administration, certain tax changes were introduced via the Customs, Excise Tariff (Variation) Amendment Order, 2023 (henceforth referred to as ‘the Order’) published on the 8th of May 2023 and the Finance Act, 2023, which was signed into law on the 28th of May 2023.”
“Among others, the Order introduced new Excise Duty on Single Use Plastics (SUPs), higher Excise Duties on some locally manufactured products, including alcoholic beverages and tobacco products, and Green Tax by way of Import Tax Adjustment on certain categories of imported vehicles.
“The Tinubu Administration has since noticed that some of the tax policies are being implemented retroactively with their commencement dates, in some instances, pre-dating the official publication of the relevant legal instruments backing the policies. This lacuna has created some challenges of implementation.
“Indeed, the intentions behind upward adjustments of some of these taxes are quite noble. They were designed to raise revenue as well as address environmental and health issues of concern. However, they have generated some significant challenges for, and elicited serious complaints amongst key stakeholders as well as in the business community.
“Excise Tax increases on tobacco products and alcoholic beverages from 2022 to 2024, which had already been approved, are also being implemented. But a further escalation of the approved rates by the current Administration presents an image of policy inconsistency and creates an atmosphere of uncertainty for businesses operating in Nigeria.”
According to Alake, “the Excise Tax of 5% on telecommunication services has generated heated controversy. There is also a lack of clarity regarding the status of this tax, just as players in the sector also complain about the imposition of multiple taxes on their operations.
“On the Green Taxes, including the Single Use Plastics tax and the Import Adjustment Levy on certain categories of vehicles require more consultation and a holistic approach to the country’s net zero plan in a manner that does not impact the economy negatively.”
Offering perspectives into the Tinubu administration’s fiscal policy objectives on the green economy, Zachaues Adedeji, Special Adviser to the President on Revenue, noted that the suspension of Green Tax imposed on manufacturers in the country was ill-timed as there are no alternatives for plastics, hence imposing taxes on it would be inhuman.
He said: “To borrow the word of Mr. President, in as much as we want to be environmentally friendly, if it’s not provided with alternative, it will be inhuman to tax the only option that we have. And that’s why we said we would suspend it pending the time we have alternatives for the other use of all these plastics.
“So, it is the view of the president that it would not be a good representation not providing an alternative, and then we start imposing the taxes. That is why we have to suspend this for now.”
Alake noted: “You all recall that at our interactive engagement a while ago with the President on climate change issues, the President did use an analogy to explain the issue. Yes, he is for climate change by all means, this government is for climate. “However, we must contextualize the imperative of climate change viz-a-viz our own peculiarities. This is Africa. Have we ever analyzed how much of our contribution to global warming to now impose on us the onerous responsibility of reducing global warming through climate change Dynamics?
“And what does all this mean? The developed society is telling us that we must reduce global warming, there must be climate change activities and stuff like that, and mechanisms must be put in place through our industries, to reduce carbon emissions. However, when you look at the components of global pollution, those developed societies are the ones contributing about 97% to global pollution, and Africa contributes only 3% to global pollution, and you are now saying, we should assume hook, line and sinker the rhetoric of reducing global pollution by imposing on ourselves very strenuous, putting our necks in a straitjacket when we do not contribute significantly to that problem.”
Recall that the Green Tax elicited reactions from stakeholders who questioned the rationale given challenges faced by millions of citizens without access to alternative sources of energy but grappling with the search for cooking fuel in rural communities, where the use of firewood is common among several households.
The Green Tax was introduced on the account of Nigeria as a signatory to the Paris Agreement of December 12, 2015, which came into force on November 4, 2016. According to the United Nations Framework on UN Climate Change, where global leaders committed to reduce green gas emission well below the increase in the global average temperature to well below 2°C above pre-industrial levels” and pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels.”
The Paris Agreement assented by 196 parties is a legally binding international treaty on climate change, adopted by the UN Climate Change Conference (COP21) in Paris, France, On 12 December 2015 and came into force on 4 November 2016.
Alake explains that President Tinubu’s argument revolves around the practicality of asking those in rural areas to stop using firewood as their primary cooking fuel. He said the president questions how such a request can be made when alternative options like the widespread availability of gas or other technical cooking methods haven’t been established across the country. He said Tinubu is emphasising the need for infrastructure and access to modern cooking technologies before expecting a shift away from traditional firewood usage.
“Are we now going to stop our people from cooking simply because we want to reduce global warming? That is the kernel of the issue. That’s why for now, we use plastics for sundry things like bottled water and all that. But if you look at the global consumption or usage of plastic, our contribution is still so infinitesimal as to impose on ourselves that harrowing tax, which also contributes to inflation, rising cost of goods and services with the multiplicity.”
Providing further insight on suspension of 5 % Communication tax, Adedeji explained that the federal government is putting in place a wholistic plan to review all taxes in line with President Tinubu’s avowed commitment and promise, adding that Nigerians should await a robust plan on the fiscal framework that aligns with Tinubu administration ‘s economic plan.
Adducing reasons for suspending communication excise duty, which is passed on to the consumers, Uzoka-Anite noted that “President Tinubu in his inaugural speech promised to undertake full review of multiplicity of taxes. And if you’re adding a new tax or does that mean you’re adding to already existing multiple taxes? So, the best thing to do is to stop adding any new taxes, review what we already have, simplify them, and identify how you want to tax. And again, we are also very mindful of the impact of these multiplicity of taxes on Nigerians, especially the consumers of these products, because the manufacturers and the telcos the minute you put on any tax, they pass those taxes to the consumers. So, your call charges begin to go up, and the prices that you are paying for even locally manufactured goods begind to go up.
“So, the President and this administration is very sensitive to the plight of the Nigerians and like he’s already promised, we will ensure that the suffering is reduced and ensure that businesses operate in a more friendly environment where we manage taxes in a way that it is also very business friendly. In addition to of course, we are here looking for increased revenue, but it should not be at the expense of the average Nigerians. And that is basically the reason basically for the suspension of the taxes.
“Ultimately, as you know, there’s a consumer protection agency, and as we effect the suspension, we believe that any cost that has been passed over to the consumer will also be suspended. And this will be enforced through the consumer protection agencies of the government. We do know that as all my colleagues have said, the ultimate gain is to alleviate the plight of Nigerians and we will ensure that this is done through appropriate agencies of government.”
Laoye on her part explained that the federal government is engaging with the regulators and telecommunication companies, National Communications Commission (NCC) and manufacturing associations and regulators.
“We are very aware of the inflationary effect this is causing and for us, it is a major policy trust that we will have to manage and regulate prices, if we have to and also introduce price controls when necessary. And that is going to be your question because you are asking, is there going to be price control to manage these costs so that the consumers do not inevitably carry on costs that no one is helping to protect them. So yes, we are already working on those already engaging with the regulators,” she noted.
Public debate trailed the introduction of 5% Excise Tax for telecommunication services in Nigeria by the Buhari administration. Invariably the burden of the new tax was transferred to end-users (consumers), resulting in a rise in the cost of calls and data, an additional burden on consumers. Stakeholders are optimistic that with suspension of this telecommunication tax, the cost of calls will come down.
Following the orders signed by Tinubu, Nigerians hope it creates an enabling business environment, repositions the investment climate, and generates employment, and a fiscal policy regime that eliminates multiple taxes. Analysts are optimistic the executive orders, may inspire confidence in the economy, and create opportunities for business to rebound after a spell of COVID19 pandemic and Naira redesign fiasco that created setback for businesses, including small and medium enterprises (SMEs).