THE recent decision by the Federal Executive Council (FEC) to increase the Value-Added Tax (VAT), on goods from 5 per cent to 7.2 per cent in a bid to increase the country’s non – oil revenues and also reduce its reliance on crude oil sales has continued to generate hot debate among experts and Nigerians.

The Minister of Finance, Budget and National Planning, Zainab Ahmed, in a news report explained that the extra revenue will create the required funds to meet the new minimum wage obligation.

“This is important because the Federal Government only retains 15 per cent of the VAT, 85 per cent is actually for the states and local governments to enable them to meet the obligations of the minimum wage,” the minister had said.

“We were proposing and the council has agreed to the increase in the VAT rate from five per cent to 7.2 per cent. Though, a decision is yet to be taken on the effective date of the new rate.”

Although, Ahmed made a U-turn in a statement by her spokesperson, Yunus Abdullahi, saying that that the proposed increase was 7.5 per cent instead of the initial 7.2 per cent earlier announced based on the recommendation of the presidential technical advisory committee.

After the increase in the minimum wage from N18,000 to N30,000 in April 2019, the Federal Government had argued that majority of the 36 states would struggle to pay salaries of their workers, insisting the proposed VAT hike is part of its drive to increase tax revenue for states to pay their staff.

A VAT is a consumption tax payable on goods and services consumed by individuals, government agencies and business organisations.

Currently, Nigeria has one of the lowest VAT rates globally when compared with other African countries like Ghana with a VAT rate of 15 per cent, South Africa 14 per cent, Egypt 10 per cent, Morocco 20 per cent and Mauritius 15 per cent — the difference is quite obvious.

REA MORE: https://www.icirnigeria.org/economic-imbalance-how-fgs-proposed-vat-increase-will-affect-nigerians/

They will be quick to tell us that we have the lowest VAT rate in the whole world