’Femi Asu
Vice President Yemi Osinbajo has
described the current five per cent Value Added Tax rate in the country
as very low, adding that the Federal Government would increase the
taxpayer base this year.
VAT is a consumption tax payable on goods and services consumed by individuals, government agencies and business organisations.
The International Monetary Fund had last
week reiterated its advice to the Federal Government to increase the
VAT rate gradually.
The Managing Director of the fund,
Christine Lagarde, had in January during her visit to Nigeria, urged the
government to increase the VAT rate.
“To move the nation forward, we must
move beyond oil. The reality is that while oil accounts for 14.4 per
cent of our Gross Domestic Product, it continues to be the source of 90
per cent of official foreign exchange earnings; and prior to this year,
up to 76 per cent of government revenues,” Osinbajo said.
He said having an easy source of revenue
had denied Nigeria the opportunity to engage in critical thinking to
develop the economy.
“In order to move forward, we must
reduce the current dependence of the federal and state governments on
the ritual sharing of revenues from oil. Doing so requires broader and
genuine efforts at the diversification of our economic structures in
terms of drivers of economic activities. The foundation for a strong
economy requires that we have appropriate fiscal policies,” the vice
president explained.
Noting that the country had a very low
rate of VAT of five per cent and a low taxpayer base, Osinbajo said, “We
are focused on increasing the taxpayer base in the first instance this
year.”
“At the federal level, implementation of
the budget will stimulate the economy rather than impose undue
austerity. Accordingly, up to 30 per cent of expenditure has been
devoted to capital spending and N500bn for social intervention, which
will create jobs directly and indirectly, while also boosting demand.”
According to him, non-oil sources,
comprising mainly Company Income Tax, VAT, and customs and excise duties
are expected to contribute about N1.5tn, which is more than oil-related
revenue estimated at about N820bn.
“This is unprecedented in a long while
in our nation and is a near complete reversal of the previous ratio of
oil to non-oil revenues. These are bold and clear indications that the
Buhari administration is serious about change,” he said.
The vice president noted that the way
forward was for the nation to move from reliance on crude oil to the
production of petroleum products.
Osinbajo stated, “By this, I mean that
instead of merely extracting and exporting crude oil, Nigeria must now
take full advantage of the petroleum sector and its entire value chain.
This will mean refining our crude before it is exported; it will entail
becoming an African regional petrochemical hub.
“It will also require making full use of
our natural gas resources domestically and abroad; and it will require
that we fully implement local content laws and regulations in the oil
sector so as to fully utilise its abundant forward and backward
linkages.”
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