President Muhammadu Buhari has said the Finance Bill 2019 which he forwarded to the National Assembly, will enable government to raise the country’s Value Added Tax, VAT, from 5 to 7.5 per cent when passed into law.
Buhari disclosed this in Abuja on Tuesday when he presented the 2020 Appropriation Bill to the joint session of the National Assembly.
According to him: “The draft Finance Bill proposes an increase of the VAT rate from five per cent to 7.5 per cent. As such, the 2020 Appropriation Bill is based on this new VAT rate.
“The additional revenues will be used to fund health, education and infrastructure programmes.
“As the States and Local Governments are allocated 85 per cent of all VAT revenues, we expect to see greater quality and efficiency in their spending in these areas as well.”
The President pointed out that the VAT Act already exempted pharmaceuticals, educational items, and basic commodities, adding that the exemptions were being expanded under the Finance Bill, 2019.
Some of the specific items to be exempted from the proposed VAT include; brown and white bread; Cereals including maize, rice, wheat, millet, barley and sorghum; Fish of all kinds; Flour and starch meals; fruits, nuts, pulses and vegetables of various kinds; Roots such as yam, cocoyam, sweet and Irish potatoes; Meat and poultry products including eggs; Milk; Salt and herbs of various kinds; and Natural water and table water.
Buhari also pointed out that the bill had five objective.
“Accompanying the 2020 Budget Proposal is a Finance Bill for your kind consideration and passage into law.
“This Finance Bill has five strategic objectives, in terms of achieving incremental, but necessary, changes to our fiscal laws.
“These objectives are; Promoting fiscal equity by mitigating instances of regressive taxation; Reforming domestic tax laws to align with global best practices and Introducing tax incentives for investments in infrastructure and capital markets.
“Supporting Micro, Small and Medium-sized businesses in line with our Ease of Doing Business Reforms; and Raising Revenues for Government.
“Additionally, our proposals also raise the threshold for VAT registration to N25 million in turnover per annum, such that the revenue authorities can focus their compliance efforts on larger businesses thereby bringing relief for our Micro, Small and Medium-sized businesses,” he said.
Furthermore, the President maintained that, “it is absolutely essential to intensify our revenue generation efforts.
“That said, this Administration remains committed to ensuring that the inconvenience associated with any fiscal policy adjustments, is moderated, such that the poor and the vulnerable, who are most at risk, do not bear the brunt of these reforms.”