• Moves to harmonise collection with ECOWAS directives
• Body commends govt for taxing informal sector
Federal Government has said Nigeria’s Value Added Tax (VAT) performance was the lowest in the West African region, describing the development as worrisome.
Calling for policy change, the government disclosed that the VAT rate was less than one per cent to Gross Domestic Product (GDP).
Director, Tax Policy, Federal Ministry of Finance, Budget and National Planning, Basheer Abdulkadir, raised the concern at the opening of a three-day workshop on harmonisation of Nigeria’s VAT Act with ECOWAS directives, organised by the ECOWAS Commission, under the context of implementation of support Programme for Tax Transition in West Africa (PATF).
PATF is geared at improving management of domestic taxation and ensuring better coordination in ECOWAS and West African Economic and Monetary Union (WAEMU) regions.
Abdulkadir said: “Our VAT performance or rate is still one of the lowest. Nigeria has a VAT of less than one per cent to the GDP, and this is worrisome. Also, we have the lowest VAT within the sub-region, with an average of 16 per cent, while VAT rate in Nigeria is 7.5 per cent. So, we need a lot of policy change in tax administration. We also need to come up with strategies to address some of these issues.
He noted that VAT exemption in Nigeria is not aligned with that of the ECOWAS and “we know that these exemptions are some of the issues on revenue mobilisation under VAT. We need to align our exemptions with ECOWAS directive. There is also need to allow for tax input credit for intermediate and capital expenditure. We need to exempt a few products, goods and services from VAT, so that we allow poor households benefit from the VAT policy.”
Director of VAT, Federal Inland Revenue Service (FIRS), Lovette Onanuga, who observed that VAT has potential to raise significant amount of revenue for government, said FIRS is not resting on its oars to ensure the revenue profile of Nigeria is improved.
ECOWAS Director of Customs Union and Taxation, Salifou Tiemtore, commended measures deployed by FIRS to broaden VAT base by collecting from informal sector traders. He, however, called on government to puts in place appropriate institutional framework before commencing the initiative.
