OrderPaperToday – The proposed increment of the Value Added Tax from five percent to 7.5 percent has been reflected in the finance bill.
The finance bill accompanies the 2020 budget presented by President Muhammadu Buhari at a joint session of the Senate and members of House of Representatives on Tuesday.
According to the Executive, the increase to the VAT rate will be more beneficial to state governments and local government areas, many of which are already facing difficult fiscal conditions.
The additional revenues from the increase will be used to fund health, education and infrastructure programmes.
“As the States and Local Governments are allocated 85% of all VAT revenues, we expect to see greater quality and efficiency in their spending in these areas as well”, Buhari added.
He also disclosed that the VAT Act exempts pharmaceuticals, educational items, and basic commodities and others as contained in Section 46 of the Finance Bill, 2019.
Other commodities exempted include: “Brown and white bread; Cereals including maize, rice, wheat, millet, barley and sorghum; Fish of all kinds; Flour and starch meals; Fruits, nuts, pulses and vegetables of various kinds; Roots such as yam, cocoyam, sweet and Irish potatoes; Meat and poultry products including eggs; Milk; Salt and herbs of various kinds; and Natural water and table water,” he said.
The Nigerian President informed that proposals also raise the threshold for VAT registration to N25 million in turnover per annum, such that the revenue authorities can focus their compliance efforts on larger businesses thereby bringing relief for our Micro, Small and Medium-sized businesses.
Meanwhile, the objectives of finance bill are highlighted as follow: “Promoting fiscal equity by mitigating instances of regressive taxation; Reforming domestic tax laws to align with global best practices;
“Introducing tax incentives for investments in infrastructure and capital markets; Supporting Micro, Small and Medium-sized businesses in line with the Ease of Doing Business Reforms; and Raising Revenues for Government.”
According to him, his administration will intensity efforts to generate more revenue while ensuring that the inconvenience associated with any fiscal policy adjustments, is moderated, “such that the poor and the vulnerable, who are most at risk, do not bear the brunt of these reforms.”
The finance bill will be passed alongside the 2020 budget by the National Assembly.