The emergence of covid-19 in the global world has caused so much harm to individuals, corporate bodies and government.

The challenges posed by this pandemic ranges from health to economic, business and commercial sectors. It has caused lots of healthy crises leading to the unforeseen death of so many number of people around the globe. The effects of this virus has led also to a gross reduction in the economic activities of many nations, together with their business transactions and commercial activities and in some countries, to a stalemate. The effects of the virus on the economy of a country will continue even when the virus is eradicated. This economic effects will not stand in isolation without the tax revenue of countries being affected.

The Impacts of the pandemic on the economy as it relates to businesses and tax implications in Nigeria include:

  • Reduction in Government revenue: Nigeria is a mono economy dependent only on its oil exportation. The closure of borders by many nations as a result of the outbreak of this pandemic coupled with the fall in oil price of recent, will lead to a reduction in the revenue of the government and this reduction arises as a result of Nigeria’s increased dependencies on global economies for fiscal revenues, foreign exchange inflows, fiscal deficit funding and capital flows required to sustain the nation’s economic activities. This will lead to non-payment of import duties as well as other taxes that accrue to the government, arising from international commercial transactions.
  • Reduction in business income: This can be seen from the very few weeks that have passed. The stalemate in the economic activities of my businesses as a result of lockdown in various nations as well as the closure of borders and airspace of cross boundary nations has led to the decline in the income of many businesses. A company involved solely in the importation of raw materials from abroad for the production of its goods, has no means of continuing with its businesses at the moment. All these will lead to a decrease in the revenue accruing from businesses across the Nigeria.
  • Problem of Double Taxation: This arises also as a result of the closure of borders and airspace due to the pandemic. A non-resident in Nigeria for a period not exceeding 183 days is not subject to taxation in Nigeria. A situation where a non-resident is trapped as a result of this closure, leading the person to a stay in Nigeria exceeding the limitation period exempted from tax, such person may be liable to income tax and this will lead to double taxation of such affected person.
  • Deficit cash flow for businesses: Notwithstanding the decline in the revenue of businesses, companies are expected to keep to their primary obligations. This lack of cash flow in businesses will affect the availability of funds for the filing and remittance of their monthly Value Added Tax and Withholding tax returns. This cash flow in businesses may even lead to the termination of the employment of some employees.
  • Corporate social Responsibility: This is a situation whereby a corporation or organization makes donation to the government in the fight against a pandemic for the purpose of tax deductions in the event of filing tax returns. Such donations must be made to a public fund established or approved by the government of the federation or state in aid of or for the relief of any national disaster to be subject to such tax deductions.
  • It may lead to the winding up of companies or closure of business organizations as a result of failure to continue as a going concern.
  • It may lead to the laying off of some employees too as a result of the employer’s inability to pay or meet up with their demands at the moment.

Remedies Available In Mitigating the Effects of the Pandemic

Some tax and economic measures have been adopted by some bodies such as the Federal Inland Revenue Service (FIRS), Central Bank of Nigeria (CBN) and proposals by the House of Representatives in the Emergency Economic Stimulus Bill, 2020, in Nigeria to mitigate the effects of the pandemic.

Tax measures by the FIRS

On Monday, 23 March 2020, the FIRS announced health and safety protocols for physical visits to its offices and the following measures to mitigate the impact of COVID-19 on taxpayers:

  • Extension of timeline for filing of value added tax and withholding tax from the 21st day to the last working day of the month, following the month of deduction.
  • Extension of the due date for filing of companies’ income tax (CIT) returns by one month.
  • Use of electronic platforms for payment of taxes and processing of tax clearance certificates.
  • Filing of tax returns by taxpayers without audited financial statements which must be submitted within two months of the revised due date of filing.
  • Proposed creation of a portal where documents required for desk reviews and tax audits will be uploaded by taxpayers for online access by the tax authority.
  • Submission of tax returns online by taxpayers via efiling.firs.gov.ng or by designated e-mail accounts published by the FIRS.

Economic measures by the CBN

The CBN announced policy measures worth N3.5 trillion that includes:

  • Additional moratorium of 1 year on CBN intervention facilities
  • Interest rate reduction on intervention facilities from 9% to 5%
  • Creation of N50 billion target credit facility for affected households and small and medium enterprises.
  • Granting regulatory forbearance to banks to restructure terms of facilities in affected sectors.
  • Improving FX supply to the CBN by directing oil companies and oil servicing companies to sell FX to the CBN rather than the Nigerian National Petroleum Corporation.
  • Additional N100 billion intervention fund in healthcare loans to pharmaceutical companies and healthcare practitioners intending to expand/build capacity.
  • Identification of few key local pharmaceutical companies that will be granted funding facilities to support the procurement of raw materials and equipment required to boost local drug production.
  • N1 trillion in loans to boost local manufacturing and production across critical sectors.

Fiscal measures by the HORs under the Bill

The HORs on Tuesday, 24 March 2020 passed the Bill which seeks to:

  • Protect employees from loss of jobs as a result of COVID-19 by granting a 50% income tax rebate on the total actual amount due or paid as pay-as-you-earn (PAYE) tax under the Personal Income Tax Act, 2004 (as amended), to Nigerian companies who retain all their employees from 1 March 2020 to 31 December 2020.
  • Suspend import duties on medical equipment, medicines and personal protective gears required for the treatment and management of COVID-19 for three months, effective 1 March 2020.
  • Introduce a new moratorium on mortgage obligations of Nigerians under the National Housing Fund.

The Bill was sponsored by all principal officers of the House and is awaiting the Senate’s review and passage before presentation to the President for his assent.

Following the measures introduced by the federal government to ameliorate the impact of the Covid-19, the Lagos State Internal Revenue Service has extended the deadline for filing annual tax returns foe employees and self-employed persons by two months from 31st March 2020.

Recommendations for Nigeria

The fact that the measures provided for above are insufficient, necessitates a more active approach to lift the burden placed on Nigerians by the pandemic. I therefore, make the following recommendations:

  1. Integrated ecosystem which comprises e-commerce and e-payment adoption as digital solutions in aiding the fight against the pandemic.
  2. Suspension of the application of minimum tax provisions
  3. Suspension on VAT collection on all essentials by Nigerians
  4. Deferral of the payment of income taxes due from companies and PAYE taxes of employees
  5. Tax credit for bonuses paid to employees during the pandemic
  6. Encouragement of private sector participation

All these will go a long way in ameliorating the hardship occasioned by the pandemic to the economy of the country and the businesses going on in the country. As we look forward to the soonest end of the virus outbreak and restoration of the normal economic activities of the country.

Simon .O. Ngwu. [email protected], +2348160047260