The Nigeria Federal Government recently signed the new 7.5% VAT rate into law, and it might just be the wake of a new dawn in the financial sector
Following the approval of the 7.5% by President Muhammadu Buhari, who signed the 2019 finance bill into law in Abuja on Monday—there is a need to review the potential implication of the new development on Nigerians.
Before now, Nigerians are used to paying 5% in Value Added Tax (VAT), and while an additional 2.5% have just been implemented, this simply means additional charges on all kinds of transactions.
Talking about the objectives of the new increment on the VAT rate, a presidential aide- the special adviser to the president on Media and Publicity, MR. Femi Adesina informed that “This Finance Bill has five strategic objectives, in terms of achieving incremental, but necessary, changes to our fiscal law.
“These objectives are; promoting fiscal equity by mitigating instances of regressive taxation; Reforming domestic taxes laws to align with global best practices;
“Others are; Introducing tax incentives for investments in infrastructure and capital markets; Supporting Micro, Small and Medium-sized businesses in line with our Ease of Doing Business Reforms; and Raising Revenues for Government.” Mr. Femi added.
According to the presidential aide, the most significant function of the increment will be that there would be more revenue to finance key government projects especially in major sectors including health, education, and critical infrastructure.
While the increment is expected to be a helpful one to the Nigerians and Nigeria as a whole, its effect on Nigeria’s economy is solely dependent on the “accountability and judicious use of raised VAT” a popular twitter influencer, Dr. Dipo Awojide told.
A lot of people have taken to their respective social media platforms to share their own point of view on the latest development, whence some people went as far as comparing the VAT rate in Nigeria with that of other countries. ”Average VAT rate in most European countries is around 20-25%. You might argue that Nigeria is different. But 7.5% VAT in Nigeria is great. It helps the government raise the revenue needed for infrastructure.” Mr. Dipo added.
Like the popular saying that ‘No pain no gain’, Nigerians may have to endure a moment of inconvenience for a greater future, hopefully the government is trustworthy enough.
Meanwhile, there is a new directive from the Central Bank of Nigeria (CBN) with respect to the Tax Identification Number (TIN). According to the Apex bank, companies who make over 25 million in revenue per annum are now required to update their bank account with TIN perhaps they haven’t. Failure to comply with the new directive will mean the inability to access their various accounts moving forward.