Tag Archives: VAT

Nigeria should increase VAT to boost economy revenue – IMF.

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IMF said the increased VAT rate is still among the lowest in the world and less than charged by other major oil-exporting nations.

The International Monetary Fund (IMF) in a report on Monday said Nigeria will need to increase its value-added tax (VAT) rate to at least 10% by 2022 and 15% by 2025 from 7.5% to boost revenues after it recovers from a recession.

IMF said the Nigerian economy is at a critical juncture and the government must act fast on reforms that will help overcome the aftermath of the economic fall out due to the oil price crash and the COVID-19 pandemic.

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“Policy adjustment and reforms are urgently needed to navigate this crisis and change the long-running lackluster course,” IMF said in the report

In February 2020, Nigeria increased its VAT rate from 5% to 7.5%. The increment was widely criticised by many.

IMF said the increased VAT rate is still among the lowest in the world and less than charged by other major oil-exporting nations.

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Despite the increased VAT rate in November 2020, Africa’s largest economy, slipped into its second recession in five years as the gross domestic product contracted for the second consecutive quarter.

The National Bureau of Statistics said the nation’s GDP recorded negative growth of 3.62 per cent in the third quarter of 2020, having recorded a 6.10 per cent contraction in the second quarter.

NBS said this recession is the worst since 1987 as the Gross Domestic Product in real terms declined by -3.62% (year-on-year) in the third quarter of 2020 and is driven by the long closure of the Nigerian borders which restricted economic movements across the borders.

IMF, however, said a large share of revenues is spent on the country’s public debt service payments, leaving insufficient fiscal space for critical social and infrastructure spending and to cushion an economic downturn.

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“In this context, mobilizing revenues through efficiency-enhancing and progressive measures is a top near-term priority,” IMF said.

“Revisiting tax exemptions and customs duty waivers, increasing and broadening the base for excise taxes, developing a high-integrity taxpayer register, enhancing digital infrastructure, and improving on-time filing and payment are important measures.”

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#Newsworthy

VAT revenue increases to N339B in first quater


The federal government has generated additional N30.46 billion in the first quarter of the year (Q1 2020) based on the hike in Value Added Tax (VAT) from five per cent to 7.5 per cent that became effective from February 1, according to data released yesterday by the National Bureau of Statistics (NBS).

The NBS figures were released just as the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, met with the National Assembly leadership in Abuja yesterday to discuss the proposed cut in the 2020 Budget.

The cut, which amounted to N71.5 billion, was subject of economic analysts’ conversation with Media last night as many of them saying the reduction should reflect the country’s economic realities.

With the extra cash, VAT receipts closed at N338.94 billion in the first quarter of the year, from N308.48 billion in Q4 2019.

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The improved performance represented a 9.87 per cent increase in value quarter-on-quarter.

It also represented a 15.66 per cent rise (year-on-year), when compared to the N293.04 billion realised in Q1 2019.

According to the sectoral distribution of VAT data for Q1 2020, which was published by the statistical agency, professional services generated the highest amount of VAT with N38.30 billion and closely followed by manufacturing that generated N37.37 billion.

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Commercial and trading generated N17.19 billion while mining recorded the least amount of N61.83 million.

Textile and garment industry and local government councils recorded N306.05 million and N319.04 million respectively.


#Newsworthy…

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VAT: BEDC improve power supply


The Nigeria Labour Congress (NLC) yesterday said it would mobilise Nigerians to resist any form of increment in the electricity tariff, be it in form of Value Added Tax (VAT) or others.

This is even as it said it has nothing to do with the ongoing public hearing on the proposed increase in the electricity tariff across the country.

President of the Nigeria Labour Congress (NLC), Ayuba Wabba, who spoke in Lagos yesterday warned that the labour centre would not support any increase in the electricity tariff as it would further impoverish Nigerians.

Continue reading VAT: BEDC improve power supply

10 things you should know about new finance bill: VAT now 7.5% from 5%


Nigeria’s President Muhammodu Buhari on Monday signed into law Finance Bill 2019.

Revealing this on his Twitter page, the president said: “I am pleased to announce that this morning I signed into Law the Finance Bill, 2019.”

Since signing the bill, Nigerians do not really know what the Finance Bill entails.


Here are 10 things about the bill you need to know about as compiled by TheNews:

1. The bill was submitted to a joint session of the National Assembly October. 8th along with the 2020 Budget presentation by the president.


2. The Bill’s primary purpose is to make money available for the implementation of the 2020 Budget.

3. Although since the country’s return to democracy in 1999 no such Bill’s have been used, the practice is not entirely strange, as past military leaders from time to time used it to amend laws.


4. The Bill aims at curing the deficiencies of major primary tax legislation by amending obsolete and contentious provisions.

5. It emanated from the initiatives suggested by the President Enabling Business Environment Council (PEBEC) and the National Tax Policy Implementation Committee.


6. It seeks to promote fiscal equity and align domestic laws with global best practices.

7. It Incentivize investments in infrastructure and capital markets; and raise Government revenues.

8. It increases VAT to 7.5% from 5%

9. The 2020 Budget presentation was the first time, since the return of democracy in 1999, that a Federal Budget was accompanied by passage of a Finance Bill specially designed to support its implementation, and to create a truly enabling environment for business and investment by the private sector.

10. It’s implementation takes immediate effect.


#Newsworthy…

Increase in ‘value added tax’ will add to our burden.

…border closure is already taking its toll

National Union of Chemical Footwear, Rubber, Leather and Non-Metallic Products Employees, NUCFRLANMPE, has rejected the Federal Government’s proposed Value Added Tax (VAT) increase from five per cent to 7.2 per cent.

Speaking with reporters in Lagos, the National President of the union, Comrade Goke Olatunji, said border closure is already taking its toll on the sector, adding that the increase in VAT will add to the various challenges facing their members.

In addition, he said the increase would erode any benefit the increase in the new national minimum wage would bring to workers and Nigerians

According to him, government should widen the tax net and get people to pay tax, rather than over-tax those that are in the net already.

He said: “We reject the increase as it will further lead to our burden. At the moment, many of our members are finding it hard to survive as a result of the closure of the border. Many of our members cannot export their goods to the neighbouring companies.

“Not only this, it will also erode whatever purchasing power the minimum wage may bring. We see it as a move not well thought through with the welfare of Nigerian wage earners in mind.

“Its impact on Nigerian manufacturers and job creation and retention will be nightmarish. It is clearly insensitive to the plight of the ordinary Nigerian. What the government needs to do is to widen the tax net and get people to pay tax and not to overtax those that are in the net as of now.”

Olatunji said this will also erode the gain which is supposed to arise as a timely passage of the 2020 budget.

He said: “Yes, it is a good thing that the 2020 budget passed but I don’t see the budget making much impact next year, despite the timely passage.

“This is because the challenges facing us is enormous. One of the problems we face in our sector is erratic power supply and our employers like other employers in the country, are not finding it funny because they spend so much on alternative sources of power especially generators and diesel for most of their operations which has eaten deep into their profits.

If you recall, Dunlop and Michelin were major companies in our sector, but they left this country because of harsh operating environment, mainly the issue of power, and threw all their workers into the unemployment market. Today, their products are everywhere in the nation’s market.

“However, we are not sitting idle, we are already diversifying to boost our revenue base.”

#Newsworthy..

This is how the new VAT law will affect the cost of building materials.

Although, cost of building materials rise often without major developments in the economy, the planned increased of Value Added Tax by the government is enough reason for building material prices to spike. Now that the Federal Government has decided to increase value added tax (VAT) on some goods, it would be difficult to isolate its effect outside the bulding materials sector. Of course, it will include cost of building materials and houses in the property market. Today for instance cost of accommodation is high because the cost of building materials is correspondingly high. This is why the decision by Federal Government to unilaterally increase value added tax on goods for purposes of raising additional revenue will amount to double taxation that will increase hardship of the people.

The Federal Government recently proposed an increase of the Valued Added Tax, VAT from five per cent to seven point two per cent. The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed who disclosed this while briefing State House Correspondents after one of the Federal Executive Council, (FEC) meeting presided over by President Muhammadu Buhari in Abuja. The Federal Government had earlier, via a Circular dated 7 February 2019, revised the excise rate on products classified under tariff heading (TH) 22.06. These products included but not limited to fermented beverages like Cider, Perry, Mead, Sake among others. Mixture of fermented beverages and non-alcoholic beverages not elsewhere specified or included. But aside this, things that pertain to real estate sector are also involved.

Without considering the consequences on the poor masses, the Federal Government of Nigeria (FGN) approved and ordered the implementation of the 2019 Fiscal Policy Measure (2019 FPM), effective 1 July 2019. 2019 FPM replaces 2018 FPM, which had been in force since 27 July 2018. An in-depth analysis of the 2019 FPM reveals that government remains committed to its plan to encourage investment in industries deemed critical to its economic growth agenda; as well as discourage importation and consumption of certain items. So, creating more investment opportunities that can employ more people whose taxes and pensions are deducted from source is considered as something that would pay government better.

Nonetheless, government should also know that people who are struggling to make ends meet on their own should be encouraged otherwise, will be indirectly encouraging social vices. Increasing employment is like one who sell his goods wholesale with regular traffic of income. It is better than one who sells retail with high price. The person who is into wholesale, sells with little gains yet makes huge profits because of number according to Mrs. Angela Odubanjo who is a real estate agent. Government benchmarking taxation on importation being talked about here doesn’t preclude building materials that are not produced here in Nigeria but imported from foreign countries. Cost of building materials in Nigeria as at 2018 vary, although it is higher by 15 per cent than imported building materials.

Nigerians overseas can benefit from the market survey to estimate a budget for construction cost at home. This market survey provides details in relation to brand, size, and price which can be used to make adequate planning towards upcoming building projects in the country by being aware of the cost of building materials in Nigeria as at 2019. As is always the character of many Nigerians, the moment government pronounces such increase, they will hike the price of even the ones they bought many months back but were not sold. This makes prices of goods not stable. This instability eventually results in the total cost of erecting a building. With that, those who had wanted to build their homes will be discouraged and the housing deficits will continue and the list continues. This list includes the major building materials of a broad category, brand, size, and cost. This survey of building materials will serve as a useful tool for real estate investors, potential home builders, and professionals in the housing sectors alike. But the list can make less meaning now with the new policy in taxation.

Many of the policies promulgated by government agencies are anti – people yet because their interest is protected and not negatively affected, they do not bother.

But these days, people bother because despite the biting economic hardship in the country, the cost of building a house has continued to rise. Between October 2016 and April 2017, several building materials have become more expensive than they used to be. In October 2016, it cost N2,500 to buy the ¼ white plywood board whereas, in April 2017, the same plywood was sold for N4,200 per unit.

The price has gone higher above 20 per cent unilaterally in 2018 and 2019, yet instead of fashioning means of reducing it, government is only busy increasing it. If the increase is as a result of the minimum wage, then it amounts to Greek’s gifts moreso, not everybody has his salary increased. Any policy of government that is not public friendly is draconian and should not be supported. Mr. Chikezie Ohanusi, an Abuja based developer kicked against the tax increase saying government should only tax those rich people that live in mansions and drive big cars. According to him, it is an act of wickedness to use the yardstick for both the rich and the poor.

As expected, this holds grave consequences for developers, the government, Nigerians planning to rent or buy property as well as other stakeholders. Industry experts have bared their minds on this topic variously even though government will hear it but will think other things. This hardship should not have been compounded by the introduction of VAT if there were industries that would pay the tax. So government should support and encourage manufacturing of local raw materials and industries because that is what will increase revenue generation in the country. If the government encourages those who are into manufacturing by providing them durable electricity, the ones that are needed but are not manufactured in the country will be reduced. In this case, if they are reduced, then the tax introduction will be justified. We cannot be crying and asking government for shelter and the only help government is rendering is to increase taxation. It shows government’s insensitivity to the plight of the citizenry.

#Newsworthy..

Reps revealed finance bill to increase VAT submitted by Buhari as it passed their reading.

Members of the House of Representatives on Thursday November 28, passed the 2019 Finance Bill submitted by President Muhammadu Buhari after it passed its third reading.

The bill which introduced tax incentives for investment in infrastructure, capital markets and supports small businesses also amended six tax provisions to make them more responsive to tax reform policies.

It is expected that the 2019 Finance Bill will reform the current tax regime by amending seven acts namely: Petroleum Profit Tax Act, Custom and Excise Tax Act, Company Income Tax Act, Personal Income Tax Act, Value Added Tax Act, Stamp Duties Tax Act, and Capital Gains Act.

Channels Television reported that asides increasing the Value Added Tax on specific goods and services from 5 per cent to 7.5 percent, the bill also amends the tax provision of the Customs and Excise Tariff Act to encourage local manufacturers.

#Newsworthy…