Nigeria to increase VAT to pay new minimum wage

The Federal Government is to increase Value Added Tax by 50 per cent to pay the new national minimum wage, Bugdet and National Planning Minister Udo Udoma said Tuesday.

Mr Udoma said the raise, first announced by the chairman of the Federal Inland Revenue Service, Babatunde Fowler, will create the required funds to meet the new wage obligation being approved by the National Assembly.

Messrs Udoma and Fowler were amongst senior government officials who today appeared before the Senate Committee on Finance headed by John Enoh.

The Senate on Tuesday passed for third reading a bill seeking to increase Nigeria’s minimum wage from N18,000 to N30,000.

The House of Representatives earlier passed the same bill. Both houses must agree and the president must sign the bill to become law.

The officials were summoned by the Senate committee to explain details of the 2019-2021 Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).

Mr Fowler said the proposed payable VAT based on the increment would be between 6.75 per cent and 7.25 per cent as against the 5 per cent on all products in the country.

This implies an increase of between 35 per cent and 50 per cent.

He added that the increment will affect the Company Income Tax and the Petroleum Profit Tax.

“By the end of this year, we should be ready for an increase in the VAT. A lot of Nigerians travel to Ghana and other West African countries and they can see that theirs is much higher. They pay when they go for those trips. We should be ready for an increase on VAT,” he said.