Giving an explanation on how the proposed Value Added Tax (VAT) will be shared, Minister of Works and Housing, Babatunde Fashola, noted that the bulk of the money would be enjoyed by the States and Local Government Areas (LGAs).
This was made public by the Minister in a statement where he described the 2020 appropriation bill as pro-people and pro-state.
The Details: Fashola explained that the revenue generated from the VAT would be split two ways, 85% and 15% respectively. According to him, States and Local Governments would benefit the most with 85% while the Federal Government would retain 15% of the VAT.
The 85% would cater for salaries and infrastructure investments while the 15% would be utilized for development of infrastructure, he explained.
He said the 2020 appropriation bill was targeted at the well-being of the citizens and he challenged them to study the contents of the bill instead of worrying about numbers.
“We focus more on developmental infrastructure. A completed road is a development drive; a completed airport is also a development drive. These are the critical contents embedded in the budget, not just the numbers.”
He also noted that the government was looking to grow the economy and not hurt people with unfavourable tax regimes.
Recent Developments: Minister of Finance, Budget and National Planning, Zainab Ahmed lamented Nigeria’s poor collection rate of VAT, saying it was 0.2%, lower than the African average of 0.33%.
Similarly, Ben Akabueze, Director-General of Nigeria’s Federal Budget Office said the proposed 7.5% Value Added Tax (VAT) would only apply to businesses recording a turnover of N25 million and above.
What you should know: If approved by the federal lawmakers, the new VAT rate would take effect in 2020. In Nigeria, VAT replaced the sales tax in 1994 and was pegged at 5% by the military government of Sani Abacha.
In 2007, former President Olusegun Obasanjo increased VAT to 10% on the eve of his departure from office but it was reversed by his successor, Umaru Musa Yar’Adua, following opposition from the labour union. (Nairametrics)
