Nigeria: Prepare for 50% VAT Increase, FIRS Tells Nigerians

The Nigerian Senate
20 March 2019

Abuja — The Federal Inland Revenue Service (FIRS) yesterday urge Nigerians to brace up for an increase in the value added tax. Specifically, the FIRS said federal government would raise Value Added Tax (VAT) to between 35 and 50 per cent in order to finance the payment of the N30,000 minimum wage.

The government further disclosed that it was disposed to exploring other options outside borrowing to pay the much touted minimum wage.

Both the minister of budget and national planning, Senator Udo Udoma, and the chairman of the Federal Inland Revenue Service, Mr. Babatunde Fowler, gave this indication when they appeared before the Senate Committee on Finance to discuss the Medium Term Expenditure Framework (MTEF).

The duo were in the Senate to explain details of the 2019-2021 Medium-Term Expenditure Framework and Fiscal Strategy Paper, which is expected to be the benchmark for the 2019 budget deliberations.

Speaking the mind of the federal government, the FIRS chairman, Fowler, said that government was considering an upward review of VAT to between 35 per cent and 50 per cent, which amounts to 6.75 per cent and 7.25 per cent.

Fowler, who said the FIRS' goal was to achieve an N8trn revenue generation target this year, also stated that the 50 per cent increment would affect the Company Income Tax and the Petroleum Profit Tax.

"By the end of this year, we should be ready for increase in VAT. A lot of Nigerians travel to Ghana and other West African countries and they can see that theirs is much higher, and they pay when they go for those trips. We should be ready for an increase on VAT.

"I can certainly see an increase in VAT of at least 35 per cent to 50 per cent this year based on our enforcement activities. There certainly will be an increase in Company Income Tax (CIT) and also on Petroleum Profit Tax (PPT)".

The budget minister, Udoma, told the panel headed by Senator John Owan-Enoh that the Technical Advisory Committee on the minimum wage would submit its report to President Muhammadu Buhari this week.

He said, "It will be recalled that, as a result of agitations from the unions, the president set up a tripartite committee to look at the Minimum Wage.

"Every five years, it is supposed to be reviewed. It has not been reviewed even though there is no doubt that for both the federal government and states, it is a tough time to review wages. But the N18,000 is really too low and it is difficult for people to live on N18,000.

"The president supported a revision but it is important that as we are revising (the Minimum Wage), we (should) make sure that it can be funded; that is why we set up the Bismark Rewane Technical Committee.

"So we will be coming to you. There may be some changes, maybe in VAT and other things, but we will be coming to you in order to make sure that we can fund the Minimum Wage; not just fund the Minimum Wage but, as you announce it, you now enter into negotiations with those above the Minimum Wage and we have to be prepared for that."

According to him, the executive will be working closely with the Senate Committee on Finance on how best the Minimum Wage would be addressed, both by the federal government and the states to ensure that the whole government apparatus is not only paying salaries and doing nothing else.

"It is important that we are able to pay the Minimum Wage and still have enough resources to do infrastructure. The (Technical) Committee has virtually completed its work," he said.

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