The economy came out of recession with a growth of 0.55% at the end of the second quarter (Q2) of 2017. By the end of the third quarter, the growth was 1.4%. The growth can be linked to the impact of the Investor and Exporters Window, reforms in the ease of doing business, relative higher oil prices, and stability in crude oil production. The full expectations of the 2017 budget may not be realized, given the delay in the passage of the Appropriation Bill. However,there was movement in the positive direction.
As oil prices continued to increase, the economy was also strengthened by the non-oil sector, with the Agricultural and Solid Mineral Sectors witnessing strong performance.The stability in the foreign exchange market helped to significantly boost exports, which resulted in a trade surplus from the end of the second quarter.
The Ministry of Finance implemented the Voluntary Assetsand Income Declaration Scheme (VAIDS) in order to enhance the current Tax-to-GDP ratio of 6%. The underlying objective of the Scheme is to bring into the tax net hitherto non compliant taxable persons. According to the Ministry of Finance, the Scheme has recorded some relative success as some tax payers have already taken advantage of it to regularize their tax status. As at 31 December 2017, the Federal Inland Revenue Service (FIRS) had earned about ₦23 billion from the scheme.
The drive for improved tax collection will continue as the FG focuses, in the medium term, on increasing the tax to GDP ratio (being one of the lowest in the world) to 15%1.It is therefore imperative that tax payers are compliant with relevant tax laws and should implement appropriate document retention policies.
Apart from the indication of possible increase VAT rate on luxury goods from 5% to 15% in 2018, as documented in the 2018-2020 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF), there is no proposal to change income tax rates or impose new taxes in 2018. This shows the government’s continued focus to increase the tax base rather than increasing tax rates.
This Newsletter reviews Nigeria’s economic performance in 2017, FG’s budget proposals for 2018 and highlights how the proposed policy changes will affect the Nigerian business environment from business, regulatory and tax perspectives.
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