There are indications that the Finance Act 2020 may have far reaching negative effects on employees as they are expected to pay more taxes henceforth, according to a financial analysts cum tax expert, Yomi Salawu of Stransact Partners.
In the statement tagged: ‘Finance Act 2020: Implication for Employees,’ Salawu noted that while it was gladdening to wake up on 1 January 2021 realising that the President of the Federal Republic of Nigeria had signed the Finance Bill 2020 on 31 December 2020 but regretted that the excitement soon pales into insignificance if the import of what the bill is meant to achieve is critically analysed.
In the release which reads in part, he said, “One of the amendments introduced by the Finance Act 2020 has indirectly increased the Personal Income Tax payable by taxpayers, especially employees. The Act amended section 33 of the Personal Income Tax Act and this increased the tax payable under the Act by between 1% and 5%. This means, in addition to pension and national housing fund contributions, employees will see more deductions on their pay slip on the same income earned in 2021 when compared with 2020.”
While also noting that, the Act exempt persons earning national minimum wage or less from paying taxes altogether.
“In our opinion, this is not enough. The threshold for minimum wage which has remained unchanged for several years ought to be adjusted upward for this new tax relief to be meaningful. It is even better if this tax exemption threshold is not pegged to the minimum wage but fixed at a figure reflective of the minimum cost of surviving in a month for most urban dwellers in Nigeria. A threshold of ¦ 50,000 for complete tax exemption would have been more impactful, especially considering the impact of COVID-19 on the average taxpayer.”
Expatiating, he says, “The impact of the Act seems to be at variance with the utterances of the Honourable Minister of Finance, Budget and National Planning. The minister had stated that the federal government had no plans to increase income taxes. Therefore, the Government may need to enact new legislation with far reaching impact than the Finance Act 2020 if it truly wants to alleviate the suffering of Nigerians in 2021.”