Williams Anuku Abuja
Indications emerged on Monday, that all is now set for the 7.5percent Value Added Tax policy of the federal government to take full effect beginning from January 2020, as President Muhammadu Buhari appended his signature to the Finance Bill.
The Bill which has already been passed by the National Assembly, accompanied the 2020 budgetary appropriations which has also been signed into law by the President.
Signing of the Bill was one of the first task President Buhari performed as soon as he stepped foot into office early Monday, morning.
The President had while presenting the Bill insisted that it had five strategic objectives, in terms of achieving incremental, but necessary, changes to Nigeria’s fiscal laws.
The Nigerian government had shored up the Value Added Tax (VAT) rate from 5% to 7.2% to expand fiscal revenue in the country, a development that elicited diverse reactions from Nigerians.
Zainab Ahmed, Nigeria’s Finance Minister, Budget & National Planning had announced the VAT review at the end of the weekly Federal Executive Council (FEC) which held on Wednesday, September 11th 2019.
For Nigerians to come to terms with the VAT increase, She had explained that “This was important because the federal government only retains 15% of the VAT, 85% was actually for the states and local government and the state need additional revenue to be able to meet the obligations of the new minimum wage.
“This process involves extensive consultations that need to be made across the country at various levels and also it will involve the review of the VAT Act. So, it was not going to be implemented immediately until the Act was reviewed,” the Minister had stated.
But in a terse statement by the presidency, Buhari had explained that part of the objectives of the Finance Bill would be to; promote fiscal equity by mitigating instances of regressive taxation; reforming domestic tax laws to align with global best practices; introducing tax incentives for investments in infrastructure and capital markets; supporting micro, small and medium-sized businesses in line with our Ease of Doing Business Reforms; including raising revenues for government.
“The draft Finance Bill proposes an increase of the VAT rate from five per cent to 7.5 per cent , as such, the 2020 Appropriation Bill is based on this new VAT rate,” the President had insisted.
According to President, with the assent, there would be more revenue to finance key government projects especially in the areas of health, education and critical infrastructure.
Ordinarily, VAT is payable on goods and services consumed by any person, whether government agencies, business organisation or individuals.
According to the Value Added Tax Act Cap V1 LFN 2004 (as amended), the only items excluded from VAT include medical and pharmaceutical raw materials and products, basic food items, baby products, commercial vehicles and spare parts, fertiliser, diplomatic goods and others.
