FG Approves New National Tax Policy

In a bid to enhance revenue of the country, the federal government has approved the new National tax policy. Chief among the revisions is an increase in Value Added Tax (VAT) for luxury items such as champagne. The government is working towards an immediate increase in VAT for luxury items. The new policy, is subject to the approval of the national assembly. Kemi Adeosun, minister of finance disclosed this after yesterday’s Federal Executive Council (FEC) meeting. The meeting was chaired by Vice President Yemi Osibajo.

However, the details of the increase are still sketchy as Adeosun admitted that the National Assembly would have the final say on whether to implement the increase and what percentage to set for the items, if the increase was accepted.

“What the committee report has shown is that we should look at actually increasing VAT on some luxury items. At five percent, we have the lowest VAT and whilst we don’t think VAT should be increased on basic items, if you are going to drink champagne, for instance, in the UK, you drink Champagne, the VAT is 20 per cent. So, why should it be five per cent in Nigeria?

“So, they have made recommendations that we should pull out some luxury items and increase VAT on those items immediately. And, I think that is a very valid and sensible suggestion which we are going to take to the National Assembly to see how we can implement it. But, as far as basic goods are concerned, no there will be no tax increase. I believe it is only fair that when you consume luxury goods, you should pay a little bit more.  The National Assembly will decide the percentage”.

She also stated that at its current rate of 5%, Nigeria has one of the lowest value added tax regimes in the world%. Previous suggestions for a blanket increase in VAT to 10% during the administration of President Goodluck Jonathan had lead to uproar among the business community. Tax contribution to GDP currently stands at about six percent. The last amendment to the VAT was in 1994 by the regime of General Sani Abacha.

Other proposed reforms to the tax policy include a mandate for the Independent National Electoral Commission (INEC) to mandate political parties to articulate tax agenda during elections, a dedicated tax policy website, and the setting up of a tax policy implementation committee. The Joint Tax Board (JTB) will also be given be a role beyond its current advisory role.

A drop in crude oil prices and persistent attacks by militants in the oil rich Niger delta, led to Nigeria going into a recession for the first time in well over a decade. The three tiers of government were unable to meet revenue projections and in many cases have led to unpaid salaries and pensions for workers.