Minister of finance, Zainab Ahmed says the federal executive council (FEC) approved an increase in value-added tax (VAT) from 5% to 7.5% and not 7.2% which was announced earlier.
Although on Wednesday, the minister told state house correspondents at the end of the cabinet meeting that the FEC approved the increase to 7.2%, which is now subject to an amendment of the VAT act of 1994 by the national assembly.
However, a statement on Friday, issued by, spokesman of the minister, Yunus Abdullahi, said the proposed increase was from 5% to 7.5% and is based on the recommendation of the presidential technical advisory committee.
The statement said the committee are economists from public and private sectors with Bismack Rewane, managing director and chief executive officer of Financial Derivatives Company Limited, serving as its chairman.
It noted that the committee, in its report, recommended the increase in the VAT rate from 5% to 7.5%, adding that the prevailing VAT rate in Nigeria was still about half the African average.
According to the statement, “The proposed increase is subject to legislative intervention by the National Assembly who will have to amend the Revenue Act to reflect the proposed increase.’’
It explained that the VAT exempts food, medicines and other basic necessities, thereby reducing the economic burden on the poor.
“The existing VAT Act exempts the basic necessities such as food, medicines and education, which therefore minimizes the impact on the poor and vulnerable segments of the Nigerian society from the burden thereof, ’said the statement.
“The VAT increase, if correctly implemented, could bring in huge revenues, which would actually reduce the fiscal deficit burden.”