Contrary to earlier information that the federal government proposed 7.2% Value Added Tax (VAT) increase, the FG has clarified it proposed 7.5% increase.
The Special Adviser, Media and Communications, to the Minister of Finance, Budget and National Planning, Yunusa Abdullahi, said in a statement that the proposed VAT increase “from 5 percent to 7.5 percent is sequel to the recommendation of the Presidential technical advisory committee.
He said that the VAT increase, if correctly implemented, could bring in huge revenues, which would actually reduce the fiscal deficit burden.
He explained that the Federal Government had earlier in the year set up a technical advisory committee comprising competent and leading economists from both the public and private sectors chaired by an Economist, Mr. Bismack Rewane.
“The Committee, inaugurated on the 9th of January 2019, was to advise on the implementation of the new minimum wage. It submitted its report on 21st March 2019 in which one key recommendations to government was the VAT increase from 5% to 7.5%,” he noted.
He noted that since the subnational governments get 85% of VAT, they will benefit more.
“The benefit of an increase in VAT is therefore more beneficial to state governments and Local Government Areas (LGAs) in the country, many of which are already facing difficult conditions. The proposed increase in VAT is therefore expected to create additional fiscal space,” he stated.
The government’s borrowing programme he said could then ease and certainly the financially affected states and local governments could later focus on issues like poverty reduction, healthcare and power generation and transmission.
He noted that the proposed increase is however subject to legislative intervention by the National Assembly who will have to amend the revenue Act to reflect the proposed increase.
