THE Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, on Friday, clarified that the proposed increment in the rate of Value Added Tax (VAT) is 7.5 per cent and not 7.2 per cent as earlier announced.
The clarification came on a day a group of civil society organisations warned that the proposal to increase the VAT tate would further impoverish the poor and widen inequality.
Ahmed made the clarification through a statement issued by her Special Adviser on Media and Communication, Yunusa Tanko Abdulahi.
She said the increment was sequel to a recommendation of the presidential technical advisory committee chaired by Mr Bismarck Rewane.
“Nigeria VAT rate will still be at about half the African average and among the lowest in the world, thus sub-national governments get 85%.
“The increase in VAT is, therefore, more beneficial to state governments and Local Government Areas (LGAs) in the country, many of which are already facing difficult conditions.
“The proposed increase in VAT is, therefore, expected to create additional fiscal space,” she explained.
The statement noted that existing Revenue Act to be amended by National Assembly exempted basic necessities such as food, medicines and education which, therefore, minimises the impact on the poor and vulnerable segments of the Nigerian society from the burden thereof.
“It is expected that the exemptions will be maintained in the amended Act.
“It is gladdening that the VAT increase, if correctly implemented, could bring in huge revenues, which would actually reduce the fiscal deficit burden.
“The government’s borrowing programme could then ease and certainly the financially affected states and local governments could later focus on issues like poverty reduction, healthcare and power generation and transmission,” the statement said.
According to industry experts, the VAT increase, if enforced properly, forms part of the fiscal consolidation strategy for the country.
“It could, in fact, help address the fiscal deficit problem and the revenues estimated to be collected could actually mean lowering of the fiscal deficit burden for the government across board,” an expert was quoted to have said.
Earlier, the Tax Justice and Governance Platform (TJGP) Nigeria comprising Christian Aid, Action Aid Nigeria, Centre for Democracy and Development, Civil Society Legislative Advocacy Centre, OXFAM Nigeria and Imo State Tax Justice and Governance Platform declared that despite VAIDS, there were still myriads of companies and other taxable entities in Nigeria who are not in the tax net and still not convicted or punished in any way.
A group of civil society organsations advocated the promotion of a progressive, fair and transparent system in which domestic resources are effectively mobilised through an efficient tax system utilised for people-oriented development and provision of essential services that benefit majority of citizens, including the poor and disadvantaged groups.
“We have followed with keen interest, the trend around the Federal Government’s effort to improve revenue mobilisation to fund development in Nigeria. There have been diverse views from different interest parties on which measures will be more strategic and sustainable. Finally, the minister of finance announced an increase in the VAT rate at the last Federal Executive Council meeting held on the 11th of September 2019 after several denials of the possibility of an increase in VAT in Nigeria.