FG rakes in N1.78 trillion from VAT in Q3 2024

• The Federal Government raked in N1.78 trillion from VAT in the third quarter of 2024
• The figure is 14.16 per cent higher than what was realised in the second quarter of 2024
• The manufacturing, Information and Communication, and mining and quarrying activities sectors were the highest contributors

The Federal Government realised N1.78 trillion from Value Added Tax (VAT) in the third quarter (Q3) of 2024, according to the latest VAT report of the National Bureau of Statistics (NBS).

The Q3 VAT figure is a 14.16 per cent quarter-on-quarter increase compared to the N1.56 trillion collected in the second quarter (Q2) of 2024.

The figure indicates an 88 per cent year-on-year increase from what was recorded in Q3 2023.

A breakdown of the figure shows that the N1.78 trillion VAT revenue was driven by contributions from three key streams.

VAT payments accrued locally stood at N922.87 billion, foreign VAT payments were N448.85 billion, and import VAT was N410.62 billion.

Highest versus lowest growth rates

The report also highlighted that human health and social work activities recorded the highest growth rate of 250.39 per cent quarter-on-quarter.

It is followed by activities of households as employers and undifferentiated goods and services-producing activities for household use, which 102.09 per cent increase.

On the other hand, water supply, sewerage, waste management, and remediation activities, declined by 41.92 per cent, while activities of extraterritorial organisations and bodies also recorded a decline of 36.14 per cent.

VAT contributions by sector

According to the NBS report, the manufacturing sector contributed the highest to the overall VAT pool for the quarter with 22.21 per cent. The sector is followed by the Information and Communication sector with 20.89 per cent and mining and quarrying activities 18.90 per cent.

At the rear of the overall contribution to the VAT pool in Q3 2024 were activities of households as employers and undifferentiated household activities, which contributed 0.01 per cent.

Activities of extraterritorial organisations and bodies also contributed 0.01 per cent, while water supply, sewerage, waste management, and remediation activities contributed 0.03 per cent.

Government’s efforts to enhance revenue generation

The Federal Government has taken steps to enhance revenue generation through improved tax administration and compliance.

This necessitated the inauguration of a Presidential Committee on Fiscal Policy and Tax Reforms in August 2023.

Since its inauguration, the committee, led by renowned tax expert Taiwo Oyedele, has been concerned with creating a new tax framework that will drive economic growth and development.

The committee recommended the streamlining and harmonisation of taxes and levies paid by businesses and individuals into eight headings to make tax administration modern, simple, adaptive and enable economic growth.

It proposed a system that exempts 95 per cent of businesses in the informal sector that mostly earn N25 million or less yearly from paying all taxes, including withholding tax, company income tax, and payroll taxes.

Recently, the government proposed four strategic tax reform bills, which have been transmitted to the National Assembly by President Bola Tinubu and awaiting legislative action.

The tax reform bills propose the adoption of a derivation principle in the allocation of VAT revenues among the three tiers of government.

Tax reform bills face criticisms

However, the bills have been met with criticism and controversies. While some are calling for wider consultations before passage, others, like the Afenifere, have endorsed them.

During a meeting in October, the Northern Governors Forum said some aspects of the bills, especially the VAT components, are skewed against the interests of the North.

The forum further called on the lawmakers from the region in the National Assembly to reject the bills.

The bills were also challenged by the National Economic Council, which comprises the governors and chaired by the Vice President, Kashim Shettima.

The council asked President Tinubu to withdraw the bills from the National Assembly for further consultations, but the president insisted that any differences should be resolved in parliament.

VAT rate hasn’t been increased, remains 7.5% – Edun

Meanwhile, TheRadar reported that the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, said the rate for Value-Added Tax (VAT) has not been increased but remains 7.5 per cent as contained in the relevant tax laws and chargeable on goods and services.

Edun’s clarification on Monday, September 9, debunked reports that the VAT rate has been upwardly adjusted to 10 per cent from 7.5 per cent.