Nigeria Increases Value Added Tax

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The federal government has approved a new Value Added Tax (VAT) of 7.2 percent.

The Minister of Finance, Budget and Planning, Mrs. Zainab Ahmed disclosed this on Wednesday in Abuja at a press briefing after the Federal Executive Council Meeting (FEC).

The announcement came on the day the Presidential Election Petition Tribunal upheld the election of president Muhammadu Buhari.

According to Zainab, the new rate up from the current 5 percent will come into effect from 2020.

“We are proposing and council has agreed increase the VAT rate from five percent to 7.2 percent” she said.

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

“This process involves extensive consultations that need 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 further that , “The total revenue estimate is the sum of N7.5 trillion for the year 2020 and N2.09 trillion that will be accruing to the federation account and 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 governments are expected to receive N3.04 trillion and N2.27 trillion respectively.

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