The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, has explained that there will be an upward review of Value-Added Tax (VAT) on non-essential items despite the recent comment by the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun who told Nigerians that the government had no plan to increase.
But he said the VAT proposal will exempt most Small and Medium Size Enterprises in Nigeria from paying VAT.
Oyedele said this in a poll shared on his social media page, seen by NewsNGR.
The tax expert said the “Upward rate adjustment is on nonessential items to partly offset the impact of the reduction in rate and exemption for essential items ensuring that the masses are protected and providing some cushion for states who earn 85 per cent of VAT revenue.”
This position contradicts the minister’s position on raising VAT.
“The current VAT rate is 7.5 per cent, and this is what the government is charging on a spectrum of goods and services to which the tax is applicable. Therefore, neither the Federal Government nor any of its agencies will act contrary to what our laws stipulate,” Wale Edun said.
The Tax Committee Chairman however said that businesses will also get full credit for the VAT they pay on their assets and services in the proposed VAT regime.
According to him, the decision would lower their overall costs and moderate inflation.
Explaining the proposed VAT regime, Oyedele said that the committee submitted a proposal to the FG to discontinue consumption taxes and charge where applicable.
Oyedele said, “Zero (0 per cent) VAT on food, education, healthcare. Exempt rent, transport, etc. Increase rate on non-essential items to partly offset reduction on essential items. Discontinue with other consumption taxes and charge only VAT where applicable.
“All businesses will be able to recover VAT on their assets and services, thereby lowering their overall costs and reducing inflation.
“Over 97 per cent of SMEs will be exempted from charging VAT on their sales. VAT refunds will be faster without the need for extensive tax audits to help business cash flow.
“Sharing of VAT revenue to and among states to be more equitable. Export of services and intellectual properties will attract 0 per cent VAT to facilitate export growth.”