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FEC approves VAT increase of 7.5%, targets N7.5 trillion revenue

FEC approves VAT increase of 7.2%, targets N7.5 trillion revenue

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taxes, tax, IMF, business, FAAC disbursed N617billions in April, as South-South scoop N72billions, VAT, Finance Minister, Zainab Ahmed says Nigeria VAT collection rate is low, NBC, Rite Foods, others to pay new tax as FG identifies new revenue streams ,,Finance Minister reveals how World Bank, AfDB pushed FG into requesting Chinese loan 

The Federal Executive Council (FEC) has approved an increase in the Value Added Tax (VAT) to 7.5% from 5%.

The Minister of Budget and National Planning Zainab Ahmed disclosed this to state house correspondents at the end of the cabinet meeting on Wednesday.

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The details: FEC meeting, which was presided over by President Muhammadu Buhari, directed immediate consultations with states, local governments and other relevant stakeholders before the new rate takes effect in 2020.

According to Ahmad, “We reported to the council and the council has agreed that we start the process towards the increase of the VAT rate. We are proposing and the council has agreed to increase the VAT rate from 5% to 7.5%.

“This is important because the federal government only retains 15% of the VAT — 85% is actually for the states and local governments and the states need additional revenue to be able to meet the obligations of the minimum wage.

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“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 is not going to be implemented immediately until the act is reviewed.”

Speaking further, Ahmed stated that states need the revenue to be able to pay the new minimum wage.

“Following these assumptions, the total revenue estimate is the sum of N7.5 trillion for the year 2020.

“There will, of course, be the distribution to the three tiers of government based on the statutory revenue sharing formula as defined in the constitution and to this effect, it means the federal government will be receiving proposed aggregate of N4.26 trillion from the federal account and the VAT pool, while the states and the local governments are expected to receive N3.04 trillion and N2.27 trillion respectively.”

Recent Developments: Earlier in June, Mrs Ahmed stated that an upward review of VAT is a follow up on the agreement reached between the FG and labour union following the minimum wage increase. She stressed that such a marginal increase in VAT would enable the government to handle the incremental cost of increasing wages.

[READ: Zainab Ahmed explains why VAT will rise to 7.5% next year]

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  • Similarly, the Federal Inland Revenue Service (FIRS) has also announced that effective from January 2020, it will begin to impose VAT on online transactions, both domestic and international.
  • The commencement date of the VAT charges on online transactions, according to Fowler, would be subject to the government’s approval.

What you should know: If approved by the federal lawmakers, the new VAT rate will take effect in 2020. In Nigeria, VAT replaced the sales tax in 1994 and was pegged at 5% by the military government of Sani Abacha.

In 2007, former president Olusegun Obasanjo increased VAT to 10% on the eve of his departure from office but it was reversed by his successor, Umaru Musa Yar’Adua, following opposition from the labour union.

In the meantime, despite wide criticisms that have greeted both the online VAT and the 7.5% VAT increase, the federal government considers this, as the most potent channels to meet the new minimum wage implementation.

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Patricia

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

1 Comment

1 Comment

  1. Oluwarinumi

    September 12, 2019 at 9:03 am

    So increase in VAT rate is to pay minimum wage rate, what about the price increase of other items? For me, the Government is taking massively from the people to pay the people.

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Business

China will not accept any Microsoft-TikTok deal

Trump had raised security concerns about TikTok’s entry into the United States.

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China will not accept any Microsoft-TikTok deal, Microsoft acquires CyberX to beef cybersecurity 

China has vowed to fight against the US’ desperate attempt to force Chinese technology firm, ByteDance, (TikTok parent’s company) into selling the company’s US operations to Microsoft.

An editorial piece on China Daily Newspaper, which is state-owned, was straight to the point when it declared that the “US administration’s smash and grab of TikTok will not be taken lying down.” The piece then went ahead to describe America’s moves against TikTok as a “theft” and said the government would respond in due course.

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READ MORE: Microsoft acquires CyberX to beef cybersecurity 

“After vowing to ban the popular short-video sharing app TikTok in the United States on Friday, the White House is reportedly weighing the advantages of allowing Microsoft to purchase its US operations. Such shilly-shallying is a tactic the US administration employed during the trade deal negotiations with China,” the editorial explained.

Why the Chinese are angry: Some hours ago, President Donald Trump gave the world’s most valuable software maker (Microsoft), tactical approval to go ahead with the acquisition of TikTok. Consequently, China, through its state-backed paper, disclosed that it had “plenty of ways to respond if Trump’s administration carries out its planned smash and grab.”

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READ ALSO: Microsoft shares fall, despite impressive Q2 2020

The Backstory: Recall that Nairametrics reported that the world’s biggest software maker, Microsoft, was in talks with ByteDance, the Chinese owners of TikTok, over a possible acquisition of its US operation.

The offer by Microsoft seems to be an escalation of President Trump’s recent attacks on TikTok and other Chinese tech startups. President Trump, in June, had raised security concerns about TikTok’s entry into the world’s largest economy.

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Edo, Rivers, Ondo, Katsina, 17 others attract zero investment in 4 months

Lagos topped the list of states that attracted investments during the period under consideration.

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Ekiti, Jigawa, Abia, 10 others record no investment in 2019

About 21 states in Nigeria attracted zero investments in the last 4 months according to data from the Central Bank of Nigeria.

According to data, the following states, Rivers, Ondo, Edo, Sokoto, Oyo, Abia, and Anambra recorded zero capital importation in the last 4 months. Others are Adamawa, Bauchi, Benue, Borno, Cross River, Delta, Ebonyi, Enugu, Imo, Kastina, Kogi, Kwara, Osun, Oyo, Yobe, and Nassarawa states.

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This information is contained in the Capital importation report obtained from the Central Bank of Nigeria, CBN. The report also detailed the total amount of fresh investments attracted to the Nigerian economy during the period.

[READ MORE: States’ IGR hits N691 billion as Osun, others recorded biggest growth]

Note that most of the states that failed to attract investments during the period under review also failed to attract any investments in 2019. This means that it is either the necessary steps were not taken by the governments, or foreign investors could not find attraction in the states or the environments were simply not conducive for investment.

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Lagos outshines FCT, Niger, 5 other states

As expected, Lagos topped the list of states that attracted investments during the period under consideration. Lagos attracted the highest amount of $5.39 billion during the period. The investment inflow into the state represents over 87% of the $6.17 billion.

Lagos is followed by the Federal Capital Territory which attracted a total investment inflow of $754.01 million.

Niger State attracted a total investment inflow of $11.60 million. Sokoto State also attracted $2.50 million, while Kaduna State attracted the sum of $1.98 million and Ogun attracted $1.70 million.

Kano and Akwa Ibom states recorded investment inflow of about $700,000 and about $237,000 respectively among others.

The limited investment inflows into some of these states clearly indicate that the states are not really attractive to the investors, even before the pandemic. The Managing Partner, FA Consult, Peter Adebayo, explained that the nation’s economy is not attractive enough to pull investments to states that lack the desired viability.

“Most of the investors are scared of insurgencies in the country, though such is limited to some parts of the nation, except for the well-connected investors that are given special attention,” he said.

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Back story: Last March, Nairametrics reported that Ekiti, Kogi, Sokoto, Bayelsa, Ebonyi, Gombe, Jigawa, Abia, and five other state governments failed to attract investments in 2019.

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Business

FG reveals amount spent on school feeding program during lockdown, denies spending N13.5bn monthly

The FG said it had only spent about N523.3 million on the programme during the lockdown.

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FG reveals amount spent on school feeding program during lockdown, denies spending N13.5bn monthly, Over 20% of N-Power beneficiaries are now business owners - FG

The Federal Government has denied some media reports that it spent the sum of N13.5 billion monthly on the homegrown school feeding program across the 36 states of the federation and Abuja during the lockdown period when school children were at home.

The FG said it had only spent about N523.3 million on the school feeding program during the lockdown.

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The disclosure was made by the Minister of Humanitarian Affairs, Disaster Management and Social Development, Sadiya Farouq, during the daily briefing of the Presidential Task Force (PTF) on Covid-19, on Monday, August 3, in Abuja.

READ MORE: FG pays doctors’ N15.8 billion hazard allowance

The minister said that there had been a lot of rumours and speculations about one of the key government interventions, the Home Grown School Feeding Programme.

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She explained that the programme was modified and implemented in three states following a March 29th Presidential directive, while also stating that it was done in consultation with stakeholders.

The minister said, “It is critical at this juncture to provide details that will help puncture the tissue of lies being peddled in the public space. The provision of ‘Take Home Rations’, under the modified Home Grown School Feeding programme, was not a sole initiative of the MHADMSD.

“The ministry, in obeying the Presidential directive, went into consultations with state governments through the state Governor’s Forum, following which it was resolved that ‘take-home rations’, remained the most viable option for feeding children during the lockdown. So, it was a joint resolution of the ministry and the state governments to give out take-home rations.

READ ALSO: Nigeria to build 142 agro-processing centres

“The stakeholders also resolved that we would start with the FCT, Lagos and Ogun states, as pilot cases.”

Going further, she revealed that each take home ration was valued at N4,200 and that the figure was arrived at after proper consultation.

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The minister said that the figure was generated from data provided by the National Bureau of Statistics (NBS) and the Central bank of Nigeria (CBN).

She said, “According to statistics from the NBS and CBN, a typical household in Nigeria has 5 to 6 members in its household, with 3 to 4 dependents. So, each household is assumed to have three children.

“Based on the original design of the Home Grown School Feeding programme, long before it was domiciled in the ministry, every child on the programme receives a meal a day. The meal costs N70 per child.

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“When you take 20 school days per month, it means a child eats food worth N1,400 per month. Three children would then eat food worth N4,200 per month and that was how we arrived at the cost of the ‘take-home ration.”

READ MORE: How Clevify is turning mobile devices into classrooms

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The Minister said that it was agreed that the federal government would provide the funding, while the various state governments would handle the implementation. She said that in order to ensure a transparent process, the government had to partner with the World Food Programme (WFP) as technical partners.

She also said that her ministry invited government agencies like the EFCC, CCB, ICPC, DSS and some NGOs to monitor the process, just as TrackaNG also monitoring and giving daily updates, thereby validating the programme.

Giving a further breakdown she disclosed that in the FCT, 29,609 households were impacted, 37,589 households in Lagos and 60,391 in Ogun, making a total of 124,589 households that benefited from the programme between May 14, and July 6.

She said, if 124,589 households received take-home rations valued at N4,200, the amount would be N523,273,800.

A media report had suggested that the Federal Government claimed it was spending the sum of N679 million daily or N13.5 billion on the school feeding program across the country even during the lockdown period when school children were at home.

Patricia
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