FEDERAL government ministers plan to increase value added tax (VAT) by 2.2% to 7.2% later this year as part of an aggressive drive to boost the amount that goes into the coffers of the treasury.
Suffering from an annual infrastructural deficit of $100bn, Nigeria’s paltry budget of about $25bn is wholly inadequate to fund government expenditure plans. Apart from the fact that the country is more or less wholly dependent on crude oil sales, which account for over 90% of government revenue, Nigeria also has one of the lowest tax-to-gross domestic product ratios in the world at just 6%.
In a desperate bid to correct the anomaly, finance minister Zainab Ahmed has come up with plans to raise VAT to 7.2% from the current 5%. Mrs Ahmed said that the increase will only be commenced after the VAT Act is amended by the National Assembly and after consultations with the state and local government areas as well as the Nigerian populace.
She added: “Our projection is to finish consultations early enough so that it takes effect in 2020.”
Mrs Ahmed further disclosed that the Federal Executive Council has approved the Medium Term Expenditure Framework and Fiscal Strategic Paper for 2020 to 2022, which will guide the 2020 budget. She said the next step was to present the document to the National Assembly for consideration.