ABUJA, Sept 13 (NNN-AGENCIES) — Nigeria plans to increase value-added tax on goods, the finance minister said, as Africa’s biggest oil exporter seeks to reduce its reliance on crude sales.
Zainab Ahmed, addressing journalists after a cabinet meeting, said the government proposed raising VAT next year to 7.2% – up from 5%. The current level is one of the lowest in the world.
The planned rise must be approved by parliament before it can become law.
The committee on finance in parliament’s upper house, the Senate, will invite Zainab and the chairman of the Federal Inland Revenue Service to explain the reasons behind the plan, its chairman said.
President Muhammadu Buhari’s government has repeatedly said it wants to boost non-oil revenues since oil sales make up 90% of foreign exchange receipts. Raising more money from taxes has proved difficult in a country where so many small business are not registered.
Zainab said the cabinet approved the proposed VAT rise when it met on Wednesday.
“This is important because the federal government only retains 15% of the VAT, 85% is actually for the states and local government. The states need additional revenue to be able to meet the obligations of the minimum wage,” she said.
Nigeria’s minimum wage was increased in April to 30,000 naira ($98) a month from 18,000.
Prior to the minimum wage rise the government had argued that many of Nigeria’s 36 states struggled to pay salaries of state employees.
The West African country fell into a recession in 2016 as a result of low oil prices. Despite emerging from the recession two years ago, economic growth remains low – at 1.94% in the second quarter.
Inflation has remained in double figures for the last three years, above the central bank’s single-digit target, which has pushed up the cost of living in a country where most people live on less than $2 a day.
The proposed VAT hike is part of a broader drive to increase tax revenues.
Last week Nigeria’s tax chief Dr Babatunde Fowler said 5.32 trillion naira ($17.39 billion) was collected in taxes in 2018 and his office was targeting 8.9 trillion naira this year. — NNN-AGENCIES
