Recent tax measures introduced by the Federal Government such as the introduction of a six per cent digital tax on foreign ecommerce businesses, a N10/liter excise duty on all carbonated, non-alcoholic and sweetened beverages, as well as the resumption of tax payment on income derived from bonds and short-term securities, could reduce aggregate demand, analysts at Financial Derivatives Company Limited (FDC) have said.
The analysts, who made the prediction in FDC’s Economic Bulletin for February released yesterday, also noted that the resumption of tax payment on bonds and short-term securities may have a negative impact on the attractiveness of the fixed-income instruments. According to them, “the Federal Inland Revenue Service (FIRS) has announced the resumption of tax payment on income derived from bonds and short-term securities. This is coming barely one month after the introduction of a six per cent digital tax on foreign e-commerce businesses and a N10/liter excise duty on all carbonated, non-alcoholic and sweetened beverages. It therefore highlights the government’s quest to boost its domestic revenue generation.
“However, it will have a negative impact on the attractiveness of shortterm government securities and reduce aggregate demand.” New Telegraph reports that the Federal Government had, in 2012, exempted bonds and short-term government securities from income tax for 10 years. With the expiration, FIRS announced in a recent statement that companies should from January 2, 2022, start paying taxes on profits from loans given to the government.
Specifically, FIRS listed short term government securities to include treasury bills and promissory notes; bonds issued by state and local governments and their agencies; and bonds issued by corporate bodies and supra-national. “The taxpaying public is hereby invited to note that income tax applies to income derived by companies from bonds and short-term securities effective from 2nd of January, 2022, except for bonds issued by the Federal Government,” the circular stated.