President Muhammadu Buhari has forwarded a Finance Bill to the National Assembly.
President Buhari said this in his budget speech while presenting next year’s appropriation bill to the legislators in Abuja on Tuesday.
He said when passed into law, the bill would permit government to raise the country’s Value Added Tax Vat rate from 5 to 7.5 percent.
The draft Finance Bill proposes an increase of the VAT rate from 5% to 7.5%. 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% of all VAT revenues, we expect to see greater quality and efficiency in their spending in these areas as well.
The President said; The VAT Act already exempts pharmaceuticals, educational items, and basic commodities, which exemptions we are expanding under the Finance Bill, 2019.
President Buhari went further to list specific items that would be exempted from the proposed VAT.
Specifically, Section 46 of the Finance Bill, 2019 expands the exempt items to include the following:
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, he said.
According to the President, the bill has five strategic objectives of promoting fiscal equity, reforming domestic tax laws and raising revenue.
He said: 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; 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; andRaising 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.
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.
The Federal Executive Council had since approved the Vat increase and pledged to forward a bill on same to the National Assembly for passage into law.
Source: Voice of Nigeria