Ben Akabueze, Director General of Nigeria’s federal budget office has said the proposed 7.5% Value Added Tax (VAT) by the Federal Government will apply to businesses recording a high turnover of N25 million and above.’
Akabueze said this at the close of the 25th Nigerian Economic Summit in Abuja while adding President Buhari exempted some critical consumables from the VAT hike in finance bill that will be presented to the National Assembly today.
The Details: Ben said that the increment of VAT in Nigeria has been already settled and it is imperative to improve taxation levied on consumption.
“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.
VAT Explained: He explained that VAT is consumption tax and several Nigerians hardly engage in any activity where VAT can be charged.
“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 paltform where VAT is chargeable.”
“We expanded that to try and cover as much of the things that the poor consumes.” Akabueze said.
Akabueze added that the existing VAT law still has no threshold for applicability.
“This means even the woman on the road side is supposed to be charged VAT, but this new act has established a trench hold which says it shall be applied to only businesses with a turnover of over N25 million and above, so small businesses are exempted.” Akabueze explained.
Recent Developments: Earlier in June, Zainab Ahmed stated that an upward review of VAT was a follow up on the agreement reached between the Federal Government and Labour Unions 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.
Similarly, the Federal Inland Revenue Service (FIRS) has announced that effective from January 2020, it would 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.