Businesses With Less Than N25m Turnover Are Now Vat Exempt- DG Budget Office

According to Ben Akabueze, Director-General of Nigeria’s federal
budget office, the new 7.5% Value Added Tax (VAT) being proposed by
government will only apply to businesses with turnover of N25
million and above.

At a closing press session of the just concluded 25th Nigerian
Economic Summit in Abuja, Akabueze also noted that the finance bill
which President Buhari will present to the National Assembly on
Wednesday has exempted some critical consumables from the VAT
hike.

According to him, “the question of increasing the VAT rate in
Nigeria is a matter that has been long settled in past summits
about the necessity to increase and improve taxation through
consumption taxes.

“Indeed, about 9 years ago that was supposed to have happened.
Two things were supposed to happen simultaneously were VAT increase
from 5 to 10 percent and a reduction in personal income tax
rate.

He said years down the line, taking into account the present
circumstances, the increase has not gone as far as 10 percent, even
though the ERGP stated clearly that VAT rate will be raised to 7.5
percent.

He added that,“Nigeria’s VAT rate is still one of the lowest in
the world,” he stressed, practically pleading for understanding by
citizens to enable government raise needed revenues.

“One important thing to know is that VAT is a consumption tax,
and the truth is the generality of the poor and vulnerable
Nigerians have very minimal engagement with VAT, because they
hardly consume or engage with the platform where VAT is
chargeable.”

He said the proposed increase also came with an exemption list,
which includes certain basic commodities like food, education,
medicines.

Explaining further, Akabueze noted that the existing VAT law has
no threshold for applicability, “which means even the woman on the
road side is supposed to be charged VAT, but this new act has
established a threshold which says it shall be applied to only
businesses with a turnover of over N25 million and above, so small
businesses are exempted”.

He noted that Nigeria’s tax to GDP rate, at 8 percent is about
the lowest in the world and that increasing demands by the surging
population means the capacity to generate revenue must be
expanded.

“The VAT Act actually gives 85 percent of the VAT to the
subnational government, so the federal government is not pushing
the VAT rate to address its own issues but the reality is that is
mostly for the subnational government.

Earlier at the closing session, Minister of Finance, Budget and
National Planning, Zainab Ahmed assured that the NES#25
recommendations – which would include recommendations on VAT and
border closure- would be presented to the Federal Executive Council
(FEC) in two weeks for approval and onward incorporation into
policies.

Participants at the two-day event engaged in discussing and
finding solutions to the country’s industrialisation drive,
education, as well as the matters of increasing population, around
the theme, “Nigeria 2050: Shifting Gears”.

“The report of this summit will be well articulated as it has
been structured to capture issues raised by the participants
especially in the area of building core competencies and value
system, managing demography, achieving industrialization,
transforming education and achieving sustainable peace and
security.

“We will present the outcome of this summit to the Federal
Executive Council in two weeks and also make sure the president
sees it,” she assured.

Nigeria Economic Summit Group (NESG) Chairman, Asue Ighodalo,
who also spoke at the press meeting said the recommendations would
also be presented to the President, National Economic Council as
well as the Governors’ Forum for implementation.