Nigeria records zero revenue from luxury item tax

Nigeria recorded zero revenues from surcharge on luxury item a tax that was introduced in 2015. This is according to data from the 2019 Budget implementation report published by the Budget Office. The government had budgeted a tax revenue of N2.5 billion in the 2019 budget.

The zero tax collection was also recorded in the 2018 fiscal year based on the published data.  See page 26, line 25 of the budget implementation report for details. There is no published data for 2017 and 2016. A sum of N2.5 billion was also budgeted in 2018.

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In 2014, the Goodluck Jonathan led administration unveiled plans to introduce luxury taxes as an initiative targeted at increasing government’s tax revenue. The taxes targeted luxury taxes on items such as private jets, luxury yachts, luxury cars, business class/first class tickets on airlines and other major items typically purchased by the rich.

According to a PWC report seen by Nairametrics, the following rates applied to taxes for luxury items;

• 0% import surcharge on new private jets;
• 39% import surcharge on luxury yachts;
• 5% import surcharge on luxury cars;
• undisclosed surcharge on business and first
  class plane tickets;
• 3% luxury surcharge on champagnes; wines
  and spirits; and a
• 1% Federal Capital Territory (FCT) mansion
  tax on residential properties valued at N300
  million and above.

At the time the tax was being promoted, the Nigerian government projected a tax revenue of N480 billion in 3 years the PWC report reveals. The Buhari administration under Kemi Adeosun as Finance Minister pushed for the tax in the early years of the administration.

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U-turn: It appears the government has realized its inability to enforce this task and has now decided to re-route collection through the value-added tax. This was also proposed by the National Assembly. “The 2. 5% increment in VAT does not include items that ordinary Nigerians normally use. Many of the items that would now have an additional 2.5% increment are luxury items that ordinary Nigerians don’t use,” Senate President Ahmad Lawan explained when revealing parliament support to increase vat.