According to Ben Akabueze, Director General of Nigeria’s federal budget office, the new 7.5% Value Added Tax (VAT) being proposed by government will only apply to businesses with turnover of N25 million and above.
At a closing press session of the just concluded 25th Nigerian Economic Summit in Abuja, Akabueze also noted that the finance bill which President Buhari will present to the National Assembly on Wednesday has exempted some critical consumables from the VAT hike.
According to him, “the question of increasing the VAT rate in Nigeria is a matter that has been long settled in past summits about the necessity to increase and improve taxation through consumption taxes.
“Indeed, about 9 years ago that was supposed to have happened. Two things were supposed to happen simultaneously were VAT increase from 5 to 10 percent and a reduction in personal income tax rate.
He said years down the line, taking into account the present circumstances, the increase has not gone as far as 10 percent, even though the ERGP stated clearly that VAT rate will be raised to 7.5 percent.
He added that,“Nigeria’s VAT rate is still one of the lowest in the world,” he stressed, practically pleading for understanding by citizens to enable government raise needed revenues.
“One important thing to know is that VAT is a consumption tax, and the truth is the generality of the poor and vulnerable Nigerians have very minimal engagement with VAT, because they hardly consume or engage with the platform where VAT is chargeable.”
He said the proposed increase also came with an exemption list, which includes certain basic commodities like food, education, medicines.
Explaining further, Akabueze noted that the existing VAT law has no threshold for applicability, “which means even the woman on the road side is supposed to be charged VAT, but this new act has established a threshold which says it shall be applied to only businesses with a turnover of over N25 million and above, so small businesses are exempted”.
He noted that Nigeria’s tax to GDP rate, at 8 percent is about the lowest in the world and that increasing demands by the surging population means the capacity to generate revenue must be expanded.
“The VAT Act actually gives 85 percent of the VAT to the subnational government, so the federal government is not pushing the VAT rate to address its own issues but the reality is that is mostly for the subnational government.
Earlier at the closing session, Minister of Finance, Budget and National Planning, Zainab Ahmed assured that the NES#25 recommendations – which would include recommendations on VAT and border closure- would be presented to the Federal Executive Council (FEC) in two weeks for approval and onward incorporation into policies.
Participants at the two-day event engaged in discussing and finding solutions to the country’s industrialisation drive, education, as well as the matters of increasing population, around the theme, “Nigeria 2050: Shifting Gears”.
“The report of this summit will be well articulated as it has been structured to capture issues raised by the participants especially in the area of building core competencies and value system, managing demography, achieving industrialization, transforming education and achieving sustainable peace and security.
“We will present the outcome of this summit to the Federal Executive Council in two weeks and also make sure the president sees it,” she assured.
Nigeria Economic Summit Group (NESG) Chairman, Asue Ighodalo, who also spoke at the press meeting said the recommendations would also be presented to the President, National Economic Council as well as the Governors’ Forum for implementation.