Taxes Likely to Impact 2022 Spending in Nigeria
By Sahabi Abdul and Bashir Olanrewaju
With President Muhammadu Buhari’s signing of the 2022 budget on New Year’s Eve and the accompanying 2021 Finance Act, the stage was set for the start of this year’s fiscal regime. A distinguishing feature of the government’s fiscal policy thrust is the casting wide of the tax net to capture as many items as possible.
New taxes have been introduced while old ones were extended to cover new items. This article identifies these new taxes and the new items covered, in order to alert the spending public on the likely impact on their finances.
- Tax on soft and sugary drinks
The government through the Finance Act is imposing excise duties of 10 naira tax on each litre of non-alcoholic, carbonated or sugary drinks sold in Nigeria. Most likely to be affected are the food, beverages and brewing sector, still reeling from the higher excise charges on alcoholic drinks imposed two years ago. Consumers can expect an inflationary impact as manufacturers try to pass on the extra costs.
- VAT on online and digital transactions
The government has extended the Value-Added Tax to digital and online transactions, including purchases from online stores (such as Amazon and Alibaba) advert spending on Facebook, Twitter or Google. Such companies are required to register in Nigeria as tax agents and make the required deductions to be forwarded to the Federal Inland Revenue Service. The companies are also required to pay 6 percent of their sales in Nigeria as tax.
- VAT on cooking gas
The authorities last year introduced VAT on cooking gas, which had been waived in the past to encourage adoption and use of cleaner fuels and discourage widespread use of firewood and the attendant deforestation. The new tax was a major driver, coupled with shortages, in doubling the price of cooking gas in the second half of last year and will remain a menace to family finances.
- Stamp duties
The government’s decision to introduce stamp duties, originally meant for transactional agreements, on bank deposits is in abeyance for now pending the determination of court challenges against them. When the court cases are disposed off, the government intends to forward more amendments to lawmakers to increase their scope and application, according to the finance minister.