SEC calls for corporate bond tax holiday to boost market liquidity

…To launch the revised capital market master plan next month

The Securities and Exchange Commission has urged the federal government to consider its proposal to exempt corporate bonds from paying tax.

SEC Chief Executive Lamido Yuguda said this Friday during a press briefing on the results of the second meeting of the Capital Markets Committee this year.

The Federal Inland Revenue Service (FIRS) had announced that the income tax would apply to income earned by businesses from bonds and short-term securities beginning January 2, 2022.

Recall that in 2012, the federal government exempted bonds and short-term government securities from income tax for ten years, which recently expired on January 1, 2022.

The FIRS circular had stated: “The Federal Government, by order dated January 2, 2012, exempted bonds and short-term government securities from income tax for 10 years. The exemption expired on January 1, 2022, with the exception of bonds issued by the federal government.

But speaking on the corporate bond tax, the SEC CEO said the move to seek tax exemption would help unlock the attractiveness of the corporate bond market.

He said, “The Nigerian capital market community held its second Capital Market Committee (CMC) meeting of the year on Thursday, August 18, 2022. The meeting was attended by over 300 capital market operators and we we had very solid deliberations.

“We have observed that the world is facing high inflation and low growth. Consequently, the World Bank, International Monetary Fund and other economic forecasters are cutting growth estimates, with forecasts reflecting significant downgrades to the outlook for the rest of the year and 2023.

“The Commission is continuing its dialogue with the Minister of Finance, Budget and National Planning on the request for tax exemption for corporate bonds.”

He added: “For any asset class, investing is a function of many considerations. Taxation is only one of these considerations. Although only one, it is an important consideration, especially when the tax rate is high.

“So I think right now, given that there are so many considerations, and given all of those factors, we think the tax refund should be reinstated and we’ve been working with the tax authorities and taxes to advocate a return to the status quo.”

The SEC CEO also said the revised capital market blueprint will be launched by November after it is approved by the federal government.

The Capital Market Master Plan Implementation Board had in June this year submitted the revised Nigerian Capital Market Master Plan (2021-2025) to the Minister of Finance, Budget and National Planning.

Yuguda assured that despite the difficult operating environment, the Commission will continue to strive and fulfill its mandate of protecting investors and creating an enabling environment for market operations.

The SEC boss urged all stakeholders to continue working to reduce the volume of unclaimed dividends and reiterated that severe sanctions will be imposed on any stakeholder whose action appears to thwart the Commission’s efforts on this objective. .

He lamented that despite the commission’s efforts in implementing the electronic dividend warrant management system, investors continued to complain about the delays in electronic dividend payments and cumbersome manual process, among other shortcomings.

“A large number of investors are still unaware of the existence of eDMMS and have not mandated their accounts. However, the Commission will continue to raise awareness in this regard.

“Capital market operators must also do more to demonstrate through their activities an efficient capital market that puts the interests of investors first,” he added.

As part of his efforts to stem the tide of fraudulent activity by unregistered investment crowdfunding platforms, the SEC CEO warned during the briefing the operators of these platforms that they risk be prosecuted.

He said: “The Commission has an existing regulatory framework which allows private companies with the required structure and mechanism to raise capital from the public through crowdfunding. All crowdfunding platforms must register with the Commission.

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