Vice-President Yemi Osinbajo has explained that the wisdom behind federal government’s cancellation of minimum tax for insurance sector is to help the sector grow.
He said this in Abuja while delivering the National Defence College Course 28 Lecture.
Osibanjo said, “We expect to see growth in the insurance industry because they are now to be treated like just any other company and a lot of restrictions on their growth have been removed by the Act.”
He explained that operators in the industry had complained about lack of growth, adding that the tax amendment was good news for them.
Before the Act was enacted, he said that insurance companies were only allowed to carry forward losses for four years, even when firms in other sectors of the economy could carry forward their losses indefinitely.
He said, “This anomaly has now been removed. They can now carry their losses forward indefinitely.”
The Vice President said the Finance Act was the government’s fiscal response to the twin issues of generating enough revenue and creating a good environment for businesses to thrive.
He said the Finance Act had two main purposes. The first was that it addressed the issue of domestic revenue mobilisation.
The second, he said, was that it contributed to improving the ease of doing business in Nigeria.
“The two major objectives of the Finance Act which the President signed into law a couple of weeks ago is first, to ensure generation of revenue; and secondly, to create a better environment for doing business in Nigeria,” he said.
While agreeing that the engine of commerce in any economy remained the Small and Medium Enterprises, he said one of the most important objectives of the Finance Act was the specific incentives for small businesses
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, while speaking on the insurance sector tax reform, said it allowed the insurance companies to carry forward tax losses indefinitely similar to companies in other sectors of the economy.
Ahmed said this during the Deloitte Economic Outlook event with the theme, ‘Expectations for 2020: Budget 2020, strategic revenue growth initiatives and Finance Act 2020’, in Lagos.
She said, it “Eliminates the specific minimum tax for insurance companies, and grants tax deductions for legitimate expenses on a time apportionment basis. It enables insurance companies to become competitive and better able to mobilise long-term funds for development.