Nigeria has increased Value Added Tax (VAT) from 5 percent to 7.5 percent to raise revenue but exempted many foodstuffs from VAT to alleviate the cost burden from consumers.
Effective February 1, 2020, VAT will not be charged on bread, cereals, cooking oils, culinary herbs, fish, flour and starch, fruits, meat and poultry. Others are milk, nuts, pulses, roots, salt, vegetables, natural water, table water and sanitary towels.
President Muhammadu Buhari on January 13, 2020 signed into law the 2019 Finance Bill, increasing VAT, but also exempting companies with less than $82,000 (N25 million) capital from paying tax.
Mr Laolu Akande, the Senior Special Assistant to the President on Media & Publicity Office of the Vice President, said on January 19, 2020, that the new law seeks to consolidate efforts already made in creating the enabling environment for improved private sector participation and contribution to the economy as well as boost states’ revenues.
“It (Finance Act) is designed to promote fiscal equity by mitigating instances of regressive taxation; reforming domestic tax laws to align with global best practices; and to introducing tax incentives for investments in infrastructure and capital markets.
“It is supporting micro, small and medium-sized businesses in line with the administration’s Ease of Doing Business Reforms; Raising Revenues for Federal, State and Local Governments,” Mr Akande said.
In Nigeria’s revenue sharing formula, 85 percent of collected VAT goes to states and local governments.
Contributions to pension and retirement funds, societies and schemes are now unconditionally tax-deductible.
With the new Act, the N50 ($0.14) Stamp duty charge is now applicable only to transactions amounting to N10,000 ($27.55) and above, a significant increase on the former threshold of N1,000 ($2.75).