Senate approves 50% increase in the VAT rate despite grumbling aloud about the process for passage of the executive bill.
Members complained that they were not give copies of the bill to study before the debates. Despite this, they overwhelming voted to increase the rate of VAT from 5.0 to 7.5 percent yesterday, 20 November 2019,
It is a sharp increase that, when signed into law, will further raise the cost of basic necessities in Nigeria.
There was an urgency in the National Assembly to pass the bill because the 2020 budget presented to the legislature in October this year has already tied government revenue projections to income from the proposed VAT increase.
The bill was titled, “Nigeria Tax and Fiscal Bill, 2019.” Senate Majority leader, Alhaji Yahaya Abdullahi, sponsored it.
Other amendments
The increase in VAT rate automatically triggered amendment of associated tax laws to reflect the new tax regime.
Thus, the bill as passed includes amendments to laws on taxation of petroleum profit, custom and excise collections. It also led to amendment of company and personal income taxes, stamp duties tax, and capital gains tax.
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Manufacturers add VAT, an indirect tax, to cost of producing goods and services at each point in the sales chain. It ends when final consumers absorb all increases as they purchase the final products and services.
Analysts said the increase will automatically affect final costs of goods and services consumers must pay. They argued that this is the major drawback of this regressive tax as it negatively impacts mostly on the poor.
Government however gave assurances that it will cushion its impact on the poor in many ways. President Muhammadu Buhari gave the assurance while presenting the 2020 budget to the National Assembly.
Certain categories of businesses – such as those with annual turnover of less than N25million, educational items, and basic commodities – are exempted from VAT, the President said.
He also suggested that the poor will ultimately benefit from the increase in VAT, as the additional income from VAT will fund healthcare, education and infrastructure which are basic needs.
Senate approves 50% VAT increase
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