Buhari, ministers approve increase in Nigeria’s VAT

The Federal Executive Council on Wednesday approved an increase in the Value Added Tax (VAT) payable in Nigeria.

The Minister of Finance, Zainab Ahmed, announced the approval while briefing journalists after the FEC meeting presided by President Muhammadu Buhari.

Mrs Ahmed said the VAT was increased from the current 5 per cent to 7.2 per cent.

“We also reported to council and council has agreed that we start the process towards the increase of the VAT rate.

“We are proposing and council has agreed to increase the VAT rate from 5 per cent to 7.2 per cent,” she said.

Mrs Ahmed gave an increase in revenue accruable to state governments as one of the reasons for the increase.

“This is important because the federal government only retains 15 per cent of the VAT, 85 per cent is actually for the states and local government and the states need additional revenue to be able to meet the obligations of the minimum wage.”

The minister, however, said the implementation will not be immediate as there was the need to amend the current law.

“This process involves extensive consultations that needs to be made across the country at various levels and also it will involve the review of the VAT Act.

“So, it is not going to be implemented immediately until the Act is reviewed,” she said.

She said the increase in the VAT was also included in the government’s revenue projection for 2020.

“Following these assumptions, the total revenue estimate in the sum of N7.5 trillion for the year 2020 and N2.09 trillion that will be accruing to the federation account and the VAT respectively.

“There will of course be the distribution to the three tiers of government based on the statutorily revenue sharing formula as defined in the constitution and to this effect, it means the federal government will be receiving proposed aggregate of N4.26 trillion from the federal account and the VAT pool, while the states and the local government are expected to receive N3.04 trillion and N2.27 trillion respectively,” she said.

– Premium Times