Is Finance Bill 2025 aligned with the National Tax Policy?

The National Assembly has invited members of the public and stakeholders to submit memoranda on the proposals made in the Finance Bill, 2025.

The government has indicated that the Bill is mainly aimed at enhancing administrative aspects and to seal revenue leakages.

It is notable that in 2023, it laid out its national three-year tax strategy covering financial years 2024/25 to 2026/27. The medium-term revenue strategy (MTRS) was prepared to document the approach the government would adopt in enhancing domestic revenue collection.

Some of the key thematic areas that MTRS sought to address include setting the country on a path to increase the country’s tax-to-GDP ratio to 25 percent by 2030. Promotion of investment to spur economic growth also emerged as a key theme in the strategy. Notably, the implementation of the MTRS was expected to grow the tax-to-GDP ratio by five percent in the three-year period.

The government also published the National Tax Policy in 2023 as part of its effort to enhance predictability and transparency of tax policies.

The Policy sought to address historical challenges experienced by taxpayers, investors, and other stakeholders in navigating the country’s tax system.

Some of the key areas identified are expansion of the tax base, embracing international best practice in tax administration, creating certainty and predictability of tax rates and tax bases, promotion of investments and reduction of tax expenditure.

The rejection of the Finance Bill 2024 greatly impacted the implementation of the MTRS. It was the first year of the strategy, and the government had rolled out a wide range of changes, including introducing new taxes and evies. The outcome of the process, however, sent the government to the drawing board.

A comparison of the MTRS vis-à-vis the various tax policy and administrative changes implemented last year and those proposed in the Finance Bill 2025 depicts a mixed bag of fortunes.

The MTRS had identified some notable interventions that would have varying impacts on different categories of taxpayers. Some include a reduction in the corporate income tax rate from 30 percent to 25 percent, reintroduction of minimum tax, and review and rationalisation of exemptions on entities.

A review of the personal income tax band structure, taxation of pensions, exemptions on individuals’ income, and tax reliefs were set out as key interventions for natural persons.

The MTRS also set out a review of the VAT threshold, a review of exempt/zero-rated supplies, a review of the VAT rate, introduction of VAT on education and insurance services, and the removal of the threshold for applying the VAT input apportionment formula.

The government has implemented several of the targeted interventions through the Tax Laws (Amendment) Act, 2024, while others are included in the Finance Bill, 2025.

There are, however, numerous pending interventions that the government should consider as it seeks to improve the general well-being of the citizenry.

By and large, stakeholders should analyse the MTRS and the National Tax Policy to identify potential interventions that have not yet been implemented and that would benefit the public. Such proposals can then be channelled to the National Assembly for consideration.

The writer is an Associate Director at Ernst & Young LLP (EY)