President Muhammadu Buhari on Tuesday presented a Finance Bill to a Joint Session of the National Assembly, seeking to increase the Value Added Tax (VAT) rate to 7.5%.
The President said the 2020 Appropriation Bill is based on this new VAT rate.
He highlighted five “strategic objectives” of the bill while urging the lawmakers to consider and pass it into law.
“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; and Raising Revenues for Government.
“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,” Buhari said.
He noted that the VAT Act already exempts pharmaceuticals, educational items, and basic commodities, “which exemptions we are expanding under the Finance Bill, 2019”.
“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.
“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 sum of N8.155 trillion was estimated as the total Federal Government revenue in 2020.