Nigeria Senate Passes Law Raising Value Added Tax Rate To 7.5%
The Nigerian Senate has approved an increase in the Value Added Tax (VAT) rate to 7.5 percent from 5 percent in a move to support government efforts to increase revenue and balance its books.
Nigeria has one of the world’s lowest tax rates and the government has been struggling for years to increase revenues and cut back on borrowing.
The West Africa country ramps up budget deficits to about N378.98 billion in October alone as earnings from oil and not-oil fell short of expectations.
Africa’s biggest economy gross revenue in October stood at N894.09 billion naira, compared with N1.25 trillion naira budget estimate for the period. The 28.2 percent drop in the revenue estimate figure was attributed to a shortfall in both oil and non-oil revenue.
Total revenue from oil sector stood at N577.30 billion, which represents 64.6 percent of total earning by Nigeria, while income from non-oil stood at N316.79 billion.
The passage of the bill will require concurrent approval from the House of Representatives, while President Muhammadu Buhari would also have to sign it before it can become law.
The Acts amended in the Finance Bill include the Companies Income Tax Act, Cap C21 2004 (as amended to date); Value Added Tax Act, Cap VI, LHN 2007 (as amended), and Customs and Excise Tariff (Consolidation) Act, Cap C49, 2004.
Others are Personal Income Tax Cap P8, LFN 2007 (as amended); Capital Gains Tax Act Cap C1, LFN 2007; Stamp Duties Act Cap S8, LFN 2004, and the Petroleum Profit Tax Act (PPTA) 2004.
President of the Senate, Ahmad Lawan while signing off the passage of the bill, said the bill’s passage by the Senate was intended “to ensure that we (National Assembly) streamline the tax system in Nigeria and get revenue for the government to provide services and infrastructure to the citizens of this country.
“What we have done is very significant because this is to ensure we not only have credible and reliable sources of funding for the 2020 Budget but also for subsequent activities of government.
“The revenue-generating agencies will have to sit up. The National Assembly, particularly the Senate, will be mounting a lot of oversight on the revenue generating agencies. If they have targets, we must ensure they meet these targets.
“What we intend to do is to engage the revenue generating agencies on a quarterly basis to evaluate their performance on revenue generation, and to identify if there are challenges and how we can achieve better outcomes.
“I believe what we have done is not to put tax burdens on the ordinary people. What we have done is to create more revenues to provide services and infrastructure for Nigerians, including the ordinary people.
“This exercise was done in a bi-partisan manner, and that is what we are known for,” Lawan said.