By Adedapo Adesanya
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has urged the incoming administration to increase the Value Added Tax (VAT) from the current 7.5 per cent to 10 per cent, saying this would stimulate the country’s economic growth.
The minister made the call during a courtesy visit to the headquarters of Voice of Nigeria (VON) in Abuja.
Mrs Ahmed said: “VAT is one of the ways to increase revenue, and we still have to increase VAT because at 7.5 per cent, Nigeria has the lowest VAT rate in the world, not in Africa, in the world. In Sub-Saharan Africa, the African average is 18 per cent; when you increase your VAT, your Gross Domestic Product (GDP) will grow.”
She noted that the government had used the finance bills to block leakages, and strengthen the Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service, adding that the government has also done automation of the two institutions through the process.
Mrs Ahmed’s recommendation is below the 15 per cent suggested by the International Monetary Fund (IMF) in the next four years at the conclusion of its 2022 Article IV Mission in Nigeria.
Explaining the rationale, the Bretton-Wood institution said since the county has become prone to borrowing from financers due to dwindling revenues from the nation’s oil proceeds, an advisable move would be to double its current VAT.
Nigeria, according to the IMF, taxes below the average in the Economic Community of West African States (ECOWAS) as compliance improves.
Countries like Nigeria’s neighbour, Benin Republic, have an 18 per cent VAT, while Ghana has 12.5 per cent with Niger at 19 per cent.
“This includes further increasing the VAT rate to 15 per cent by 2027 in steps while streamlining numerous VAT exemptions based on systemic reviews, increasing excise rates on alcoholic and tobacco products while broadening the base, and rationalizing tax incentives by streamlining tax expenditures based on comprehensive periodic reviews,” the recommendation said.
The federal government in 2020 commenced the implementation of the 7.5 per cent VAT from the previous 5.0 per cent level following the implementation of the Finance Act 2019.
