The Federal Government has made it known, that plans are currently underway to increase Value Added Tax (VAT), by 50 percent, in a bid to help raise funds for the implementation of the N30, 000 minimum wage bill passed by the National Assembly.
Backstory: Minister of Budget and National Planning, Udoma Udo Udoma, and the Executive Chairman, Federal Inland Revenue Service (FIRS), Babatunde Fowler, announced the funding plan at an interactive session with the Senate Committee on Finance on Wednesday, to discuss the 2019 – 2021 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP).
Below are the takeaways from Udoma and Fowler’s interactive session:
The tax increases are necessary. The Minister and FIRS Chairman, both explained that the decision to increase taxes was well thought out and necessary to fund the new minimum wage, as its implementation would increase the size of the 2019 budget, which they disclosed was already in deficit.
Other taxes will also be increased. While Fowler explained that the proposed payable VAT increase would lie between 35 percent and 50 percent, it was also revealed that increments would be noted in other forms of taxes such as, Company Income Tax (CIT) and Petroleum Profit Tax (PPT). “By the end of this year, we should be ready for an increase in the VAT. A lot of Nigerians travel to Ghana and other West African countries and they can see that theirs is much higher. They pay when they go for those trips. We should be ready for an increase in VAT.
“I can certainly see an increase in VAT of at least 35 per cent to 50 per cent this year based on our enforcement activities. There, certainly will be an increase in Company Income Tax and Petroleum Profit Tax.”
FIRS targeting revenue of N8 trillion. Fowler also stated that the revenue generating agency, is currently looking at achieving a target of N8 trillion this year, with N3 trillion expected from VAT alone.
FG setting up committee to explore funding options. The minister also disclosed that the Federal Government was setting up a committee, whose sole purpose is to explore ways of increasing revenue to fund the minimum wage.