The Federal Government made N1.1 trillion from Value Added Tax (VAT) in twelve months, with the Federal Inland Revenue Service (FIRS) generating N301.62 billion of the total in the first quarter of 2019. This was revealed by a new report released by the Central Bank of Nigeria (CBN).
The total amount was, however, below target when compared to the projected N1.7 trillion, which the Federal Government set in the 2019 budget. The CBN report disclosed that the Federal Government missed N530 billion to hit the mark, prompting the President Muhammadu Buhari-led administration to introduce an increase in VAT, from 5% to 7.5% in order to finance its operation.
Revenue hit a decline in 2019: According to the CBN report, despite the N301.62 billion generated by the FIRS in the first quarter of 2019, the VAT collection by the FIRS began to decline afterwards, dropping by N6.13 billion to N295.49 billion in the second quarter, from the N301.62 billion.
Also, in the third quarter of the year under review, VAT revenue declined from N295.49 billion in the second quarter to N290.87 billion, dropping by N4.62 billion. The decline didn’t stop as the fourth quarter also experienced another drop in the VAT revenue, after recording N287.93 billion, dropping by N2.92 billion from N290.87 billion collected in the third quarter.
[READ MORE: CBN lists major constraints affecting businesses, as borrowing rates projected to rise)
FG sets another revenue target for 2020: Despite failing to meet the 2019 target, the government has set another benchmark to be met for revenue in 2020. After increasing the VAT rate, the government increased its revenue target to N2.08 trillion for 2020.
Nairametrics reported that the new VAT rate, which accompanied the Finance Act, became effective from February 1, 2020. The Finance Act includes tax expansion, which is the major measure being used by President Buhari to mobilise revenue. The Finance Bill is one of the tax reforms proposed by the government to solve the revenue problem of Nigeria.
The States in Nigeria will receive 50% (N1.04 trillion) of the projected revenue, the Local Government Councils will earn N751.43 billion, a total of 35% from the N2.08 trillion, while FG will receive N315.47 billion, which accounts for 15% of the projected revenue. The projected revenue will ensure all tiers of governments have enough cash to finance projects embedded in their various budgets.
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