Nigeria’s National Assembly Considers VAT Increase to 10% by 2025

The Nigerian National Assembly is currently reviewing a bill that proposes increasing the Value-Added Tax (VAT) from 7.5% to 10% by 2025. This move aims to address the country’s fiscal challenges, including a budget deficit exceeding 4% of GDP.

Key Provisions of the Bill

1. Phased VAT Increase: The bill suggests a phased implementation, with VAT rates increasing to:
   • 10% by 2025
   • 12.5% from 2026 to 2029
   • 15% from 2030 onwards
2. VAT Coverage: The bill aims to expand VAT coverage to include more goods and services.
3. Exemptions: Essential items, such as food, healthcare, and education, may be exempt from VAT increases.

Reactions to the Proposal

1. Criticism: Former Vice-President Atiku Abubakar described the proposed VAT hike as “regressive and punitive”, arguing it would burden low-income households.
2. Support: Some experts argue that the VAT increase is necessary to address Nigeria’s fiscal challenges and improve revenue generation.
3. IMF Recommendation: The International Monetary Fund (IMF) previously advised Nigeria to increase VAT to at least 10% by 2022.

Minister of Finance’s Response

Nigeria’s Minister of Finance, Wale Edun, has denied plans to increase VAT, stating that the current rate remains 7.5%. This conflicting information has sparked debate about the government’s intentions regarding VAT reform.

Implications of VAT Increase

1. Increased Revenue: A VAT increase could generate additional revenue for the government.
2. Inflationary Pressures: Higher VAT rates could lead to increased prices for goods and services.
3. Economic Impact: The VAT increase could affect consumer spending, economic growth, and business operations.

Next Steps

1. National Assembly Review: The bill will undergo review and debate in the National Assembly.
2. Public Consultations: Stakeholders, including businesses, civil society, and citizens, will be consulted on the proposal.
3. Presidential Approval: The bill requires presidential approval to become law.

Timeline

• 2025: Proposed VAT increase to 10%
• 2026-2029: VAT rate increases to 12.5%
• 2030 onwards: VAT rate increases to 15%

The proposed VAT increase has sparked intense debate, highlighting the need for careful consideration of its potential impacts on Nigeria’s economy and citizens.

How useful was this post?

Click on a star to rate it!

Submit Rating

Average rating 0 / 5. Vote count: 0

No votes so far! Be the first to rate this post.