By Adedapo Adesanya
Amid the recent hostility between the states and the federal government, the Lagos State House of Assembly on Thursday passed the Value Added Tax (VAT) Bill.
The Assembly, led by the Speaker, Mr Mudashiru Obasa, directed the Acting Clerk of the House, Mr Olalekan Onafeko, to transmit a clean copy of the bill to Governor Babajide Sanwo-Olu for assent.
Earlier on Monday, Mr Obasa had said the Lagos State government generated N500 billion annually from VAT but only received a small amount from the federal government.
According to analysis, Section 4 of the bill provides that the state will charge VAT at the rate of six per cent on the value of goods and services except certain goods and services listed under Part III of the schedule which shall be taxed at zero rates, these are – basic food items; medical and pharmaceutical products, medical services; books and educational materials; items covered under the Hotel Occupancy and Restaurant Consumption Law of Lagos State, amongst others.
Section 7 empowers the Lagos State Internal Revenue Service (LIRS) to administer and implement the law.
The LIRS would account for money collected in line with the law and do any other things necessary for the assessment and collection of the tax, meaning that the Federal Inland Revenue Service (FIRS) can’t carry out this function anymore.
Section 8 states that taxable persons are to register for the tax within six months of the commencement of the law or six months of commencement of business, whichever is earlier.
According to section 9, non-resident companies are to register for the tax if they carry on business in the state, using the address of the person with whom it has a subsisting contract as its address for purposes of correspondence relating to the tax.
Section 16(2) provides that an importer of taxable goods shall pay to the service the tax on the goods before clearing.
The bill also provides for a body known as the Value Added Tax Appeal Tribunal.
In terms of sharing, Section 33 states that VAT revenue shall be shared 75 per cent to the state government and 25 per cent to the Local Government Areas, a decision that has been decried by LGAs who want a 50-50 sharing formula.
Section 15 noted that a monthly remittance and returns are due by the 21st of the subsequent month in a manner specified by the LIRS. This implies that the first return under the law will become due by the 21st of the month after enactment.
There is no exemption for small businesses with turnover below N25 million as is the case under the national VAT Act.
The House also passed the bill that prohibits open cattle grazing in the state. The two bills were passed after unanimous votes by the lawmakers at the sitting where the bills were read the third time.
IMF Insists Nigeria Must Raise Taxes, Adopt Unified FX Regime for Macroeconomic Stability
By Dipo Olowookere
If Nigeria intends to achieve macroeconomic stability, it must take the bold step to put in place “decisive fiscal and monetary” policies, the International Monetary Fund (IMF) has declared.
These policies, according to the global lender, include increasing the tax rates, especially the value-added tax (VAT), from 7.5 per cent to double digits, adopting a single exchange rate regime, removing subsidies on petrol, and raising the benchmark interest rate to curb inflation, which is slightly above 21 per cent.
In a statement issued on Wednesday after the conclusion of its Executive Board’s consultation with Nigeria, the IMF said it was impressed with the growth recorded by the country’s economy after COVID-19 hit in 2020.
In the statement made available to Business Post, the IMF attributed this recovery to “favourable oil prices and buoyant consumption activities.”
“Nigeria’s economy has recouped the output losses sustained during the COVID-19 pandemic,” the organisation stated, praising the federal government for “containing and managing the COVID-19 infections.”
But it warned that “socio-economic conditions remain difficult” as a result of “higher domestic food prices, worsened the scarring effects of the pandemic, particularly on the most vulnerable—with Nigeria being among the countries with the lowest food security.”
“The near-term outlook faces downside risks, while there are upside risks in the medium term. Higher international food and fertilizer prices and continued widening of the parallel market premium could culminate in the de-anchoring of inflation expectations,” it said.
However, the IMF said if the country hopes to surmount these problems, the country must make “bold fiscal reforms to create needed policy space, [and] put public debt on sound footing” because high fuel subsidy costs have further widened “the general government fiscal deficit” in 2022.
The IMF “urged the authorities to deliver on their commitment to remove fuel subsidies by mid-2023 and increase well-targeted social spending.”
“Strengthening revenue mobilization, including through tax administration reforms, expanding the tax automation system and strengthening taxpayer segmentation, and improving tax compliance is also a priority.
“In the medium term, directors recommended modernizing customs administration, rationalizing tax incentives, and raising tax rates to the levels of the Economic Community of West African States (ECOWAS),” it also said after advising Nigeria last November to raise VAT to 15 per cent.
The body emphasised that the Central Bank of Nigeria (CBN) must further increase the policy rate if needed, and implement additional actions, including fully sterilizing central bank financing of fiscal deficits and phasing out credit intervention programs.
Last year, the bank raised the Monetary Policy Rate (MPR) by 5.00 per cent to 16.50 per cent in an attempt to bring down inflation, which moderated in December to 21.34 per cent. Last month, it further jerked the rate higher by 100 basis points.
US Markets May Give Back Ground In Early Trading
The major US markets are currently pointing to a lower open on Wednesday, with stocks likely to give back ground after moving notably higher in the previous session.
Traders may look to cash in on some of yesterday’s gains, which came amid a positive reaction to comments by Federal Reserve Chair Jerome Powell.
Powell acknowledged recent indications of easing inflation but noted that the disinflationary process has a long way to go and cautioned further interest rate hikes could be needed.
Overall trading activity may be somewhat subdued, however, with a relatively light economic calendar keeping some traders on the sidelines.
Reports on initial jobless claims and consumer sentiment are likely to attract attention in the coming days, with the consumer sentiment report including readings on inflation expectations.
Despite staying weak until noon and suffering a setback after a subsequent recovery, U.S. stocks closed on a buoyant note on Tuesday thanks to strong buying at several counters.
The major averages all ended with impressive gains. The Dow ended higher by 265.67 points or 0.8 per cent at 34,156.69. The S&P 500 closed up 52.92 points or 1.3 per cent at 4,164.00, and the Nasdaq surged 226.34 points or 1.9 per cent to 12,113.79.
A positive reaction to Federal Reserve Chair Jerome Powell’s remarks at the Economic Club of Washington lifted the market.
In a Q&A session at the Economic Club of Washington, Powell told Carlyle Group co-founder David Rubenstein that he expects 2023 to be a year of “significant declines in inflation.”
Powell said inflation is beginning to ease, though he expects it to be a long process and cautioned that interest rates could rise more than markets expect if the economic data doesn’t cooperate.
“The disinflationary process, the process of getting inflation down, has begun, and it’s begun in the goods sector, which is about a quarter of our economy,” Powell said. “But it has a long way to go. These are the very early stages.”
Microsoft shares gained nearly 4 per cent. Boeing surged 3.8 per cent, and Chevron climbed 2.6 per cent.
Walt Disney, Merck, Travelers Companies, Apple, Intel, Salesforce.com, JP Morgan Chase, American Express, Goldman Sachs and Walgreens Boots Alliance also posted impressive gains.
Hertz climbed 7.5 per cent, and DuPont shares surged 7.8 per cent on stronger-than-expected results.
Verizon, Home Depot, P&G and Caterpillar ended weak. Chegg plunged more than 17 per cent after the company came out with disappointing guidance.
In economic news, data showed the US trade deficit widened to $67.4 billion in December 2022 from a downwardly revised $61.0 billion in November.
Naira Swap: Governors Saved Nigeria from Needless Political, Economic Chaos
By Modupe Gbadeyanka
The presidential candidate of the All Progressives Congress (APC) in the February 25, 2023, election, Mr Bola Tinubu, has praised Nigerian governors, especially those of Kaduna, Kogi, and Zamfara States, for standing by the people of Nigeria.
On Wednesday morning, the Supreme Court granted an interim injunction seeking to stop the federal government and the Central Bank of Nigeria (CBN) from banning the use of old N200, N500, and N1,000 notes as legal tender in the country from February 10.
In a statement issued by the Director of Media and Publicity of the APC Presidential Campaign Council, Mr Bayo Onanuga, the former Governor of Lagos State, noted that the policy has subjected the masses to pains.
He stated that the Governors intervened and saved Nigeria from needless political and economic chaos and miseries, which have clearly become the unintended consequences of the monetary policy of the apex bank.
However, Mr Tinubu called on the CBN to ensure the execution of the Supreme Court ruling by taking all necessary steps to ensure sufficient availability of old and new Naira notes to citizens and properly sensitise the public on the ruling and the consequent validity of old Naira.
“I want to salute the courage of our Governors and most especially the Progressives Governors in APC who acted to save our country from avoidable and dangerous political crises and social unrest which the Central Bank policy on new Naira notes has brought on our country.
“Our country was dangerously careering toward anarchy and political and economic shutdown. But with the Supreme Court interim ruling, our country has been pulled back from the precipice. We thank our Supreme Court Justices for ruling wisely on the side of the people who have been subjected to undue agony and pain since this policy was announced.
“The Federal Government and relevant stakeholders can now sit down and work out a better framework on how to proceed with the new policy without causing any social and economic disruption and inconvenience to our people. We have examples of other countries that have successfully and seamlessly changed their currencies to learn from.
“Those countries give a long time, at least 12 months, to effect the currency change. They do not engage in a CBN-like fire brigade approach.
“We have seen how a good policy can be poorly implemented to cause unintended problems for the people who should be the beneficiaries. While lessons have been learnt, we must now move on as a country and people with a Renewed Hope for a better tomorrow.
“The sole aim of my running to be the president of our country is to make life better and more abundant for our people, and this is an ideal to which I will remain eternally committed,” he said.
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