- The Federal Government has announced the removal of VAT on diesel, cooking gas, electric vehicles, CNG, others
- It also announced a tax incentive for deep offshore oil and gas production
- The initiatives are part of efforts to bolster the oil and gas sector and streamline taxes
The Federal Government has announced the exemption of diesel, Liquefied Natural Gas (LNG), also known as cooking gas, Compressed Natural Gas (CNG), electric vehicles and others from Value Added Tax (VAT).
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, disclosed this on Wednesday, October 2, while unveiling two fiscal incentives to revitalise Nigeria’s oil and gas sector.
According to a statement by the Director of Information and Public Relations in the Federal Ministry of Finance, Mohammed Manga, Edun noted that the measures aim to reduce the cost of living, bolster the energy sector and speed up Nigeria’s transition to cleaner energy sources.
The statement read, “The VAT Modification Order 2024 introduces exemptions on a range of key energy products and infrastructure, including diesel, feed gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), electric vehicles, Liquefied Natural Gas (LNG) infrastructure and clean cooking equipment.
“These measures are designed to lower the cost of living, bolster energy security and accelerate Nigeria’s transition to cleaner energy sources.”
There is a tax incentive for deep offshore oil and gas production
The second incentive unveiled by Edun is the Notice of Tax Incentives for Deep Offshore Oil and Gas Production, which provides new tax reliefs for deep offshore projects.
The minister said the initiative aims at positioning Nigeria’s deep offshore basin as a premier destination for global oil and gas investments and is part of a broader series of investment-driven policy initiatives championed by President Bola Tinubu, in line with Policy Directives 40-42.
He said, “In addition, the Notice of Tax Incentives for Deep Offshore Oil and Gas Production provides new tax reliefs for deep offshore projects. This initiative is aimed at positioning Nigeria’s deep offshore basin as a premier destination for global oil and gas investments.
“These reforms are part of a broader series of investment-driven policy initiatives championed by President Bola Tinubu in line with Policy Directives 40-42.
“They reflect the administration’s strong commitment to fostering sustainable growth in the energy sector and enhancing Nigeria’s global competitiveness in oil and gas production.”
Reforms are part of FG’s efforts to streamline taxes
Since the presidential committee on fiscal policy and tax reforms was inaugurated in August 2023 by President Tinubu, it 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.
Chairman of the committee, Taiwo Oyedele, said the proposed list of taxes and levies will include income tax, property tax, VAT, customs duties, excise tax, stamp duties, special levy and harmonised levy.
He also said the Federal Government is working towards a system that will exempt 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.
Oyedele added that the informal sector comprises “people simply trying to earn a living” and should not be burdened with taxes, instead, government officials and the elite would be targeted for tax compliance.
In early September, Oyedele disclosed that the Federal Government will soon sign the committee’s proposal for the removal of taxes, including VAT on food, public transportation, house rents, health and education, which are necessities.
He stated in June that the plans to increase the VAT rate to 10 per cent will be implemented in phases. However, in a post on his X handle on Monday, September 10, Oyedele said the increase in VAT on non-essential items will help offset VAT reduction on essential items like food, healthcare and education.
Oyedele also said the proposal includes an exemption or zero per cent VAT rate on essential goods and services like food, rent, transport, healthcare and education.
“The Presidential Fiscal Policy and Tax Reforms Committee’s proposal is to reduce the VAT rate to zero per cent on food, health, education and the exemption for rent, transportation and small businesses. Data by the NBS shows that these are the areas where the average household spends almost all their income, meaning their VAT burden will reduce.
“The upward rate adjustment is on non-essential items to partly offset the impact of the reduction in rate and exemption for essential items, ensuring that the masses are protected and providing some cushion for states who earn 85 per cent of VAT revenue.
“Businesses will also get full credit for the VAT they pay on their assets and services, thereby lowering their overall costs and moderating inflation,” Oyedele said.
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, says 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.
