VAT to raise to 7.5% by 2020 FG Plans
A former Minister of Finance, Mrs. Zainab Ahmed, yesterday said the federal government was planning to increase the rate of value-added tax (VAT) to 7.5 per cent from the current five per cent by 2020.
This is as the government seeks to shore up falling revenue, according to Bloomberg.
Speaking at the Bloomberg Emerging & Frontier Forum in London, the former minister, whose tenure ended with President Muhammadu Buhari’s first term on May 29, said that her main preoccupation while in office was how to raise government’s revenue with only 55 per cent of targets being met.
Buhari, who was re-elected for a second four-year term, is yet to constitute a new cabinet.
She said: “We have developed a strategic revenue growth initiative, which we have started to implement.
“Our target is to increase revenue to 65 per cent minimum in 2019 so that in the next three years we are able to attain 80-85 per cent of our revenue target.”
However, earlier plans by government to increase VAT had been vehemently opposed by Nigerians.
In April, following a public backlash, Executive Chairman, Federal Inland Revenue Service ((FIRS), Mr. Babatunde Fowler, refuted reports it had proposed a 50 per cent increase in VAT when he appeared before the National Assembly to defend the agency’s 2019 budget.
But Fowler maintained that his position was misrepresented as he actually recommended an increase in the number of Nigerians and companies paying VAT and not the other way around.
A statement issued by his media department to debunk the claim stated: “Though he indicated that there should be an increase in the VAT rate by the end of the year, he never for once suggested a 50 per cent hike or any percentage increase at all.
“Rather, he promised improved collection in CIT, Petroleum Profits Tax, PPT and VAT in 2019 relative to the collection performance of the service in 2018. “In 2018, FIRS collected the sum of N1.1 trillion in VAT; N1.42 trillion in Companies Income Tax (CIT); and N2.4 trillion in Petroleum Profits Tax (PPT).”
Also, Ebonyi State Governor, Chief David Umahi, had further opposed the proposed plan by the federal government to lift Value Added Tax (VAT) from five per cent to 35 per cent, stressing that it would put the country in difficult situations.
The governor had said that the plan, which was proposed by the federal government in order to pay workers’ salary with the implementation of the N30,000 minimum wage, was like digging a hole to fill a hole.
According to the National Bureau of Statistics (NBS), the federal government generated N1.10 trillion as VAT in 2018, representing a growth of 13.96 per cent (year-on-year) when compared to the N972.34 billion collected in 2017.