Federal Govt has approved a 2.2% increase in VAT, a decision which has caused controversies and left experts giving analysis on how it will affect the common man.
In Nigeria, Value Added Tax (VAT) is payable on goods and services consumed by any person, whether government agencies, business organisation or individuals.
According to the Value Added Tax Act Cap V1 LFN 2004 (as amended), some of the items excluded from VAT include medical and pharmaceutical raw materials and products, basic food items, baby products, commercial vehicles and spare parts, fertiliser, diplomatic goods and others.
While the matter is still being debated, here are some facts about it:
1. The increase will effect a change from 5% to 7.2%, to expand fiscal revenue.
2. FG only retains 15% of the VAT while state and local governments share 85% .
3. VAT is to be paid on goods and services consumed by govt, businesses or individuals.
4. Items not taxed are food items, baby products, commercial vehicles medical and pharmaceutical raw materials, etc.
5. The VAT increase will not be implemented until National Assembly considers and passes it on the floor.
The new VAT will have a large effect on the price of goods and services not included in the VAT exception list. This, in turn will affect Nigeria’s inflation rate.
International organisations such as the World Bank and IMF have consistently advised Nigeria to expand its tax net and channel the funds to developmental projects and budget funding.