The director-general, Budget Office of the Federation, Ben Akabueze, has explained that the decision to raise the threshold for value added tax (VAT) is to ensure micro, small and medium businesses whose annual turnover is below N25 million are not affected.
Answering questions on the issue at the media briefing to mark the close of the 2019 Nigerian Economic Summit, #NES25 in Abuja, Mr Akabueze said the proposal contained in the Finance Bill, 2019 presented to the National Assembly for approval will ensure the impact of VAT increase does not affect small businesses.
“Two things were supposed to have happened simultaneously with the increase in VAT rate from 5 to 10 per cent and a reduction in personal income rate. One happened, but the other did not,” he said.
“Years after, he said, taking into account prevailing circumstances, “the VAT rate was not increased to 10 per cent, although the Economic Recovery & Growth Plan stated clearly the VAT rate would be raised at some point”.
At 7.5 per cent, he insisted the Nigerian VAT rate was still the lowest in the world. He said, “VAT is a consumption tax. The generality of the poor and vulnerable Nigerians have very minimal engagements with VAT, because they hardly consume the items affected by VAT.
“That’s why government does not want small businesses the poor patronise affected,” Mr Akabueze added.
Recall that President Muhammadu Buhari had announced the decision to raise the VAT threshold on Tuesday while presenting the 2020 Fiscal Appropriation Bill to the joint session of the National Assembly in Abuja.
The president said the decision was to help the revenue authorities focus their compliance efforts on larger businesses.
According to the President, the bill has five strategic objectives aimed at achieving incremental, but necessary, changes to the country’s fiscal laws.