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FG considers VAT increase

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Value Added Tax (VAT) will be increased from the present 7.5 per cent, if the Federal Government accepts the position of the Presidential Committee on Fiscal Policy and Tax Reforms.

At a policy exposure and impact assessment session, organised by the committee on Wednesday, its chairman, Mr. Taiwo Oyedele said: “We need to adjust the VAT rate upward. We would ensure that it doesn’t affect businesses. The only thing is to look at basic consumption from food, education, medical services and accommodation will carry zero per cent VAT. So for the poor and small businesses, no VAT”.

Oyedele said that the committee had proposed reviewing state and local governments’ share of VAT revenue to 90 per cent.

According to Section 40 of the VAT Act, the Federal Government gets 15 per cent of the tax revenue, states share 50 per cent, and local government councils share the balance of 35 per cent.

Oyedele said the committee is recommending reducing the Federal Government’s share to 10 per cent.

“We are proposing that the Federal Government’s portion should be reduced from 15 per cent to 10 per cent. States’ portion will be increased but they would share 90 per cent with local governments”, he said.

Oyedele said the committee proposed adjusting the sharing formula for VAT because it is a tax of the states.

“In 1986, we had sales tax collected by states. The military came up with VAT in 1993 and stopped sales tax, so they said it would collect VAT and return 15 per cent as cost of collection and that is the 15 per cent charged today came about. But we think it is too much”, he said.

The tax expert added that the burden of VAT should be on the ultimate consumer.

He further said: “So we must make it transparent and neutral. And this is what over 100 countries where they have VAT are doing”, Oyedele said.

“Nigeria’s economy is more than 50 percent in services and if I just stop at this, many states will be broke because VAT collection will go down by more than 50 percent and it won’t even fly”.

Oyedele said other consumers would pay a bit more.

“We have spoken to businesses about it and they won’t increase the product price. We want to make sure when we do VAT reform, no one will increase the price of commodities. We will work the mathematics with the private sector”, he said.

Oyedele also said that each state should not be granted exclusive custodianship of their collections because it would likely result in chaos.

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