- Wale Edun, Minister of Finance and Coordinating Minister of the Economy, says the VAT rate remains 7.5 per cent
- Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, says the committee’s proposed VAT hike applies only to non-essential items
- The World Bank and the IMF have been at the forefront of VAT rate increase in the country
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.
In a statement on Monday, September 9, Edun debunked reports that the VAT rate has been upwardly adjusted to 10 per cent from 7.5 per cent.
Edun’s clarification comes on the heels of recent media reports of an imminent increase in VAT following the statement by the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, in June that the plans to increase the VAT rate to 10 per cent will be implemented in phases.
The statement led to public condemnation and spurred calls from Nigerians for reconsideration.
In addressing the report, Edun said, “For emphasis, as of today, VAT remains 7.5 per cent and that is what will be charged on all the goods and services that are VAT-able.”
The minister noted that the tax system stands on a tripod: tax policy, tax laws and tax administration, all of which must combine to give a sound system that gives vitality to the government’s fiscal position.
He said, “The current VAT rate is 7.5 per cent and this is what the government is charging on a spectrum of goods and services to which the tax is applicable. Therefore, neither the Federal Government nor any of its agencies will act contrary to what our laws stipulate.
“The tax system stands on a tripod, namely tax policy, tax laws and tax administration. All three must combine well to give us a sound system that gives vitality to the fiscal position of the government.
“Our focus as a government is to use fiscal policy in a manner that promotes and enhances strong and sustainable economic growth, reduces poverty as well as makes businesses flourish.”
‘Government wants enabling environment for businesses’
The minister added that contrary to opinions in the media, the Federal Government is making efforts to create the enabling environment for businesses to thrive through its policies.
He said one of such policies is the 150-day stoppage of import duties, tariffs and taxes on staple food items, aiming to rein in soaring headline and food inflation.
Edun said “The imputation in some media reports on the issue of VAT and the opinion articles that have sprouted from them seem to wrongly convey the impression that the government is out to make life difficult for Nigerians. That is not correct. If anything, the Federal Government has, through its policies, demonstrated that it is committed to creating a congenial environment for businesses to thrive.
“In fact, it is on record that the Federal Government, as part of efforts to bring relief to Nigerians and businesses, recently ordered the stoppage of import duties, tariffs and taxes on rice, wheat, beans and other food items.”
VAT hike proposal to apply only to non-essential items
In what seems like a further clarification to the statement by Edun, the Chairman of the Presidential Tax and Fiscal Policy Reforms Committee, Taiwo Oyedele, said the proposed hike In VAT rate applies only to non-essential items.
Oyedele, in a post on his X handle on Monday, September 10, said the increase in VAT on non-essential items will help offset VAT reduction on essential items like food, healthcare and education.
He 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 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 added.
World Bank, IMF have been championing proposals for VAT increase
As one of the strategies to increase non-oil revenue and boost Nigeria’s fiscal resources, the World Bank and the International Monetary Fund (IMF) have often proposed a raise in the VAT rate to the Federal Government.
Both argued that increasing the VAT rate from the current 7.5 per cent should allow for input tax credits, as well as recommended removal of exemption on petrol.
Tinubu’s tax committee wants food, house rents, public transportation, others to be tax-free
Meanwhile, TheRadar reported that Taiwo Oyedele, the chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, says President Bola Tinubu will soon sign the committee’s proposal to the Federal Government for the removal of taxes on food, public transportation, house rents, health and education, which are basic necessities.
Oyedele, disclosed this while appearing as a guest on Channels TV’s programme, Politics Today, on Monday, September 3 and said the committee’s proposal includes the exemption of value-added tax (VAT) on necessities.
