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Tag: Value Added Tax

  • Nigeria targets tax cut with major reforms to boost efficiency

    Nigeria targets tax cut with major reforms to boost efficiency

    The Presidential Committee on Tax Reforms and Fiscal Policy says it is determined to simplify the excessive number of collectable taxes and levies, currently exceeding 60, aiming to reduce them to fewer than 10 at all levels of government.

    Chairman of the Committee, Taiwo Oyedele, made this known when he addressed State House Correspondents on Tuesday.

    He stated, “Our aim is to consolidate these taxes at all levels of government, reducing the total number to less than 10.”

    Oyedele also noted the burden posed by the existing plethora of taxes and levies, stressing that around 96 per cent of the total revenue collected by the federal, state, and local governments is derived from a small set of fewer than 10 taxes.

    The Chairman expressed the critical nature of revising Nigeria’s taxation laws and regulations, noting the committee’s engagement with the Senate and the House of Representatives to address necessary reforms.

    In the context of the controversy surrounding the Value Added Tax (VAT) law, Oyedele stressed the need for Nigerians to come together to find solutions rather than relying on the courts.

    He announced that the committee has initiated public consultation and stakeholder engagement and has already received input from every state in Nigeria.

    Regarding the need for constitutional amendments for most of the reforms, Oyedele pointed a lack of clarity regarding taxing rights between levels of government as a major challenge.

    He stated, “We have over 60 taxes and levies, officially collectable by federal government, state government, and local governments. Unofficially, those taxes number over 200, making life difficult for our people.”

    The Chairman also discussed the shift in tax structure and revenue generation, highlighting that having a higher number of taxes does not necessarily lead to increased revenue and can create opportunities for financial leakages.

    In the second phase of the committee’s report, critical reforms will be revealed, addressing the multiplicity of taxes and rewriting major tax laws.

    Oyedele shared that the committee has been actively engaging with various key stakeholders, including policymakers, to put the framework in place for implementing their recommendations.

     

  • VAT battle with FG: Wike blows hot, vows to enforce Rivers tax law

    VAT battle with FG: Wike blows hot, vows to enforce Rivers tax law

    Rivers State Governor, Nyesom Wike has vowed to enforce the State’s Value Added Tax Law 2021 to its letters, stressing that all corporate bodies, business entities and individuals that fail to comply will face the full weight of the law.

    Governor Wike especially directed the Rivers State Revenue Service (RSRS) to ensure the full and total implementation and enforcement of the law against all corporate bodies, business entities and individuals with immediate effect.

    TheNewsGuru.com (TNG) reports the Governor’s directive follows a Federal High Court judgement setting aside a stay-of-execution order the Federal Inland Revenue Service (FIRS) filed against a judgement of the Federal High Court, Port Harcourt, which upheld the constitutional right and authority of State Governments to impose, collect and utilize value added taxes (VAT) within their respective territorial jurisdictions.

    Speaking during a statewide broadcast on Monday, Governor Wike said that some States with presently low economic activities and ethically restrictive social policies with economic implications may be adversely affected for now, but that in the long run, States will benefit.

    The Rivers State Governor lambasted his Katsina counterpart, Aminu Masari, who Wike said is vainly conspiring to truncate the efforts by the Rivers State Government to collect VAT.

    Governor Wike’s text of the statewide broadcast reads: “My dear people of Rivers State, as we all know, following the recent judgement of the Federal High Court, Port Harcourt, which upheld the constitutional right and authority of State Governments to impose, collect and utilize value added taxes (VAT) within their respective territorial jurisdictions, the Rivers State Government enacted the Rivers State Value Added Tax Law 2021 to regulate the effective administration of VAT in Rivers State.

    “As expected, the Federal Government, through the Federal Inland Revenue Service (FIRS), disagreed and filed an appeal coupled with a request for stay-of-execution of the judgment before the Federal High Court.

    “While the appeal was pending and without any stay-of-execution of the subsisting judgement, the FIRS went about to bully corporate bodies and business entities from paying the VAT to the Rivers State Government even when they knew that an appeal does not serve as a stay neither was there anything to stay in a declaratory judgement.

    “As a mere agency of the Federal Government without any political authority the effrontery and impunity exhibited by the FIRS against the Rivers State Government was ill-advised and highly provocative.

    “However, being a government that believes in the rule of law we decided on our own to suspend the enforcement of the Rivers State VAT Law 2021 pending the outcome of the FIRS’s application for stay-of-execution.

    “Today, the FIRS has failed in its attempt to frustrate the enforcement of the State’s Law on VAT with the Federal High Court’s dismissal of its application for stay-of-execution of the judgement.

    “It is important to reiterate the fact that we did no wrong in exercising our legal right under our constitutional democracy to stop the continuing breach, denial and curtailment of the constitutional right of States to lawfully impose and collect value added and other related taxes within jurisdiction to the exclusion of the Federal Government.

    “And in doing so our singular and progressive objective was to contribute to the advancement of fiscal federalism by enabling the federating States to explore and exploit their potential and capacity for generating greater internal revenues with which to fund their development goals and reduce the outdated over-reliance on pitiable Federal allocation and other handouts.

    “Naturally, some States with presently low economic activities and ethically restrictive social policies with economic implications may be adversely affected for now.

    “But, this is not our own making. Like the right to derivation, this is also a constitutional prescription, which we all swore as political leaders to respect and defend as the supreme law of the land.

    “Above all, fiscal federalism remains the right path to economic self-reliance and sustainability for all our States and the benefits derivable from this case by all the States in the long run far outweigh the immediate revenue loss that some States may presently suffer.

    “All that is required is for all of us to wear our thinking caps as elected Governors to collectively fight for the greater devolution of resources, responsibilities and powers to the federating States.

    “It is therefore very unfortunate that some State Governors led by that of Katsina State are vainly conspiring to truncate this progressive reality in favour of the inequitable status quo so that the Federal Government can continue to rob Peter to pay Paul as the nation’s self-imposed tax master-general.

    “For us in Rivers State, we will continue to ensure and project our constitutional rights to access all possible resources we can take hold both within and outside our geographical boundaries to advance the progress of our State.

    “And with today’s judgement the way is now clear for the administration and enforcement of the Rivers State Value Added Tax Law 2021 across the entire State until otherwise decided and set aside by the Superior Courts.

    “Consequently, I hereby direct the Rivers State Revenue Service (RSRS) to ensure the full and total implementation and enforcement of this law against all corporate bodies, business entities and individuals with immediate effect.

    “All corporate bodies, business entities and individuals are advised to willingly, truthfully and promptly comply with their tax obligations under this law to avoid the full weight of the stipulated sanctions, including having their business premises sealed-up.

    “Let me warn that the Rivers State Government is fully in charge of the State and will not tolerate any further attempt by the FIRS to sabotage or undermine our authority to freely administer our tax and other related laws in our own State. Those who play with fire risks having their fingers burnt. Enough of the shenanigans.

    “I wish to further assure every resident that we shall as usual make effective use of the expected proceeds from this tax to accelerate the development of our State and improve the wellbeing of everyone”.

  • VAT yesterday, today and forever – Dele Sobowale

    By Dele Sobowale

    “FG, States, LGs share N601bn for November.” News Report, December 2020.

    Truth is constant; and wisdom is enduring. The amount shared by the three tiers of government for November, which will determine whether or not public servants will be fully paid their salaries for December 2020, is 14 per cent less than the N700bn monthly revenue which the Federal Government announced in 2018 that will be required for governments to meet their obligations to workers. Then, Minimum Wage was N18,000 per month; it is now N30,000 per month.

    When President Buhari signed Minimum Wage Bill into law in 2019, with firm instructions for immediate implementation, some of us consulted our economic forecasting models and concluded that Buhari, the National Assembly and the State Governors were deceiving workers. The Nigeria Labour Congress, NLC, and other allied union groups assumed they were victorious. One of their best and brightest even proclaimed that Governors failing to pay will be prosecuted and jailed. We were certain that it was all a mirage. Governments will find it almost impossible — to pay the new wages. Nobody would be prosecuted.

    “There are only two families in the world, my old grandmother used to say; the Haves and the Have-nots.” Miguel de Cervantes, 1547-1616.

    As you are reading this article, four days to Christmas, millions of public servants in most states have no idea how much – if anything – they will take home for the Yuletide. Christmas 2020 already promises to top those of the past four years for dreariness and a pervasive sense of deprivation. Life, for most Nigerians has never been so bad and so sad. More millions of Nigerians have slipped into abject poverty than the same period last year.

    At 77+, I am nobody’s grandmother, but rightfully a grandfather to millions of Nigerian kids. And, I can state authoritatively that never in Nigerian history has the dividing line between Haves and Have-nots been so sharp in this country. That, in part, has created the battle lines nationwide – especially in the North. All over the nation, the poor are no longer begging. They are demanding by violence for a greater share of the national wealth. A war has started between the Haves, especially those in top public service positions, and the Have-nots.

    VAT PROVIDES A SILVER LINING

    “The total distributable revenue of N601.1bn comprised statutory revenue of N436bn; Value Added Tax revenue of N156.79bn…”

    Permit me to congratulate the FG for the historical achievement on the VAT revenue collection. For once, the FG listened to professional advice; took courage and increased VAT from 5 per cent to 7.5 per cent despite the hysterical objections of the NLC and other ill-informed commentators. Let me explain the breakthrough which the Buhari administration has achieved by this — for the sake of those who might not recognise the significance of that statement.

    Hitherto, VAT as a percentage of distributable revenue has hovered between 8 and 10 per cent. But, in November 2020, VAT contributed a whopping 26 per cent of the total – about 160-200 per cent increase. Furthermore, while statutory revenue declined precipitously, VAT rose astronomically to partly make up the difference. As an unrepentant promoter of VAT, I challenge any of its opponents to ask the FG and state Governors to return 26 per cent of the November allocation because VAT is unacceptable. There is no doubt in my mind that nobody will listen to them – now that everybody has seen the benefits of VAT as a more reliable revenue generator than crude oil has become; and will turn out to be in 2021. Here is why.

    “Nigeria’s daily oil production falls to 1.32 million barrels” News Report.

    Budget 2021 will kick off in nine days time. Already, there is a lot of bad news portending another disastrous year. Since, our country is apparently incurably hooked on crude oil revenue and the FG cannot think of any other options, we are forced to examine first the implications of 1.32 million barrels per day production. Unless there is sudden change in production volume, the report indicates that we will only achieve 57 per cent volume projected in the budget. That will mean that the country will be running a negative variance in revenue, foreign exchange earnings, debt-to-revenue ratio and expected deficits etc from the first month of next year. The governments now finding it difficult to pay workers will be in more distress than ever before. In that case, VAT will play an increasing role in our revenue-generation effort. In that connection, we might need to revisit VAT first, and then consider a more radical approach to raising funds for our governments.

    LEE KUAN YEW AND SAUDI LESSONS WE SHOULD NOT IGNORE.

    “The world does not owe us a living; we cannot live by the begging bowl.” That was what Yew, 1923-2015, said when he became Prime Minister of a nation without natural resources; but which today makes Nigeria look sick with our abundant resources. Beggars are always treated with disdain globally. So we have no reason to expect respect. To restore our national pride, we should throw away the begging bowl and look more inwards for hidden funds to develop our country. There are still a few untapped possibilities – two of which could add N1tn to our revenue next year and set us on our way to self-reliance.

    But, we have not exploited the potentials of VAT enough. As it is, left untouched VAT will deliver close to N1.5tn in 2021. We can adjust it and collect N500bn more. That amount should keep the universities opened annually – if given to them and stimulate aggregate consumption and production as well. For this purpose, we need to revisit the example of Saudi Arabia, a richer oil producing country which went farther with VAT and is scooping the rewards. I recall part of an article published earlier this year as COVID-19 was just showing its ugly head. The points made then remain just as valid today. We need to be tougher with ourselves to survive.

    “Saudi Arabia triples VAT to support Coronavirus-hit economy”.

    BBC NEWS, BUSINESS, MAY 11, 2020.

    The news report went on to explain why Saudi Arabia, a nation many Nigerians assume has no financial and economic problems, has turned its attention to increasing the Value Added Tax, VAT, as an option for achieving macro-economic stability in the next three to ten years.

    “Saudi Arabia is tripling its value added tax (VAT) as part of austerity measures to support its coronavirus-hit economy….Saudi Arabia’s state news agency said VAT will increase from 5% to 15% as of 1 July…These measures are painful but necessary to maintain financial and economic stability over the medium to long term.”

    It is not only the sense of responsibility of the Saudi economic policy managers that one finds commendable. While Nigeria increased from 5% to 7.5%, the courageous Saudis went from 5% to 15%. The President of Nigeria had been under attack for a mere 50% VAT increase; the Saudi leader will most probably not receive any abuse by economic illiterates and academicians because the people are better educated, more patriotic and can see the temporary inconvenience as part of the price they have to pay for 200% increase.”

  • FEC approves 2.2 per cent increment in Value Added Tax

    FEC approves 2.2 per cent increment in Value Added Tax

    A new Value Added Tax (VAT) of 7.2 percent has been approved for Nigeria by the Federal Executive Council (FEC), Minister of Finance, Budget and Planning, Mrs Zainab Ahmed, has announced.

    Addressing newsmen after the weekly FEC meeting on Wednesday, the Minister said this increment was subject to an amendment of the VAT act of 1994 by the National Assembly and if approved by the parliament, the new rate will become effective from 2020.

    Before now, there have been talks about an imminent hike in VAT paid on goods and services in the country so as to increase revenue generated by government to meet the needs of the nation, which depends mainly on sale of its crude oil.

    During her interaction with journalists at the State House yesterday, Mrs Ahmed said, “We also reported to council and council has agreed that we start the process towards the increase of the VAT rate.

    “We are proposing and council has agreed increase the VAT rate from five percent to 7.2 percent.”

    She noted that, “This is important because the federal government only retains 15 percent of the VAT — 85 percent is actually for the states and local governments and the states need additional revenue to be able to meet the obligations of the minimum wage.

    “This process involves extensive consultations that need to be made across the country at various levels and also it will involve the review of the VAT act. So, it is not going to be implemented immediately until the act is reviewed.”

    She further said if approved by the lawmakers, “The total revenue estimate is the sum of N7.5 trillion for the year 2020 and N2.09 trillion that will be accruing to the federation account and VAT respectively.”

    According to her, “There will, of course, be the distribution to the three tiers of government based on the statutorily revenue sharing formula as defined in the constitution and to this effect, it means the federal government will be receiving proposed aggregate of N4.26 trillion from the federal account and the VAT pool, while the states and the local governments are expected to receive N3.04 trillion and N2.27 trillion respectively.”

    Recall that in 1994, under the regime of the late Military Head of State, General Sani Abacha, VAT, which replaced what was then known as sales tax, was fixed at 5 percent.

    On May 28, 2007, former President Olusegun Obasanjo raised VAT to 10 percent, but his successor, late Umaru Yar’Adua, reversed it.