The Securities and Exchange Commission (SEC) says it is engaging with the Federal Government to reconsider the exemption of tax on corporate bonds and short-term securities.
The Federal Government had on January 2022 commenced the collection of income tax on bonds, short-term securities, following the expiration of a 2012 gazette, which exempted Companies Income Tax (CIT) from bonds and short-term securities in the last 10 years.
Speaking at a virtual meeting with journalists on the outcome of the second Capital Market Committee (CMC) meeting in 2022, the Director-General of SEC, Yuguda Lamido, stated that the commission is still engaging with the Honourable Minister of Finance, Budget and National Planning on the request for tax exemption on corporate bonds and short-term securities.
He said:“We believe that tax exemption should return to the capital market. Stakeholders also agree with this. Therefore, the commission continues its engagement with the Honourable Minister of Finance, Budget and National Planning on the request for tax exemption for corporate bonds.”
On its impact on the corporate bonds transactions, Lamido noted that tax, among others are key considering factors to invest in any asset classes.
Continuing, he said: “Tax is only one part of considerations in investing in any asset classes. Although it is only one, it is also an important concentration, especially when the tax rate is actually high.
“So, I think for now, given other considerations like liquidity, return on investment, risk, among others, it is very premature to start to draw inferences in terms of whether the decline or increase, actually has something to do with tax rebating. Tax is a very important of the process and why we believe the tax rebate should be restated. The market also believed in tax exemption on corporate bonds and we are working with tax and fiscal authorities to advocate for its return to the status quo.”
He said that the commission would sanction Capital Market Operators (CMOs) that are frustrating the electronic dividend mandate process while pleading with investors to try and mandate their accounts.
He disclosed that SEC is working to ensure it reduces the level of unclaimed dividends to zero per cent in the financial market even despite the country’s unclaimed dividend currently standing at N177 billion.
Yuguda said that as of December 31, 2020, unclaimed dividends stood at N168 billion and added that at the end of 2021, the figure rose to N177 billion. “The SEC has done a lot in terms of working with registrars to ensure dividends are distributed electronically via bank accounts,” he added.