By Adedapo Adesanya
Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has clarified that the Federal Executive Council (FEC) approved an increase in value added tax (VAT) from 5 percent to 7.5 percent and not 7.2 percent as earlier reported in the media.
Earlier this week, on Wednesday, the Minister told state house correspondents at the end of the cabinet meeting that the FEC approved the increase to 7.2 percent, which is now subject to an amendment of the VAT act of 1994 by the national assembly.
But in a statement made available on Friday, spokesman of the minister, Mr Yunus Abdullahi, said the proposed increase was from 5 percent to 7.5 percent, clarifying that it was based on the recommendation of the presidential technical advisory committee.
He said the committee included top economists from public and private sectors with Mr Bismack Rewane, managing director and chief executive officer of Financial Derivatives Company Limited, serving as its chairman.
Mr Abdullahi said the committee, in its report, recommended the increase in the VAT rate from 5 percent to 7.5 percent, adding that the prevailing VAT rate in Nigeria was still about half the African average.
“The proposed increase is subject to legislative intervention by the National Assembly who will have to amend the Revenue Act to reflect the proposed increase,” the statement read.
Mr Abdullahi said following considerations of the economic reality that the VAT exempts food, medicines and other basic necessities, thereby reducing the economic burden on the poor.
“The existing VAT Act exempts the basic necessities such as food, medicines and education, which therefore minimises the impact on the poor and vulnerable segments of the Nigerian society from the burden thereof,” he said.
“The VAT increase, if correctly implemented, could bring in huge revenues, which would actually reduce the fiscal deficit burden.”
Dipo Olowookere