FG To Tighten Tax Noose Next Year —Ex-Finance Minister
The immediate past Minister of Finance, Mrs. Zainab Ahmed has disclosed that the Federal Government will increase the rate of Value Added Tax (VAT) to 7.5 per cent from current 5 per cent in 2020, as part of efforts to shore up falling revenue.
Mrs. Ahmed made the disclosure yesterday at the Bloomberg Emerging & Frontier Forum in London.
The former Finance Minister said: “We are looking at raising VAT from 5% to 7.5%.
“Five per cent is one of the lowest VAT rates in the whole world. We are holding a lot of consultations because in our country the law has to be amended.
“We recently increased the minimum wage and one of the agreements we had with labour is that VAT will be increased.
The consultation process will be done in 2019 and hopefully, in 2020 it will be increased.”
Ahmed, who served till the end of the first tenure of President Muhammadu Buhari, said that her main preoccupation while in office was how to raise government revenue with only 55 per cent of targets being met.
“We have developed a strategic revenue growth initiative, which we have started to implement. Our target is to increase revenue to 65% minimum in 2019 so that in the next three years, we are able to attain 80-85% of our revenue target,” she said.
Ahmed, who said she’d like to return to her former portfolio, said Nigeria hasn’t ruled out selling new Eurobonds to raise more capital and is also considering taking loans on concessionary terms from multilateral institutions such as the World Bank.
On the chances of her return to the cabinet, Ahmed said she had not discussed the issue with President Buhari.
She said: “The President is currently in the process of putting together a cabinet. I would like to go back to the cabinet in the same role. I was there for nine months and I started a number of initiatives that I would love the opportunity to push.”
She explained that Nigeria wants to build up her financial buffers to reduce risks to economy from a prolonged trade war between U.S. and China, the world’s two biggest economies.
“If this war continues, it is a major risk for us,” she said.
Last January, Ahmed had announced plans to increase VAT this year as part of a Strategic Revenue Growth Initiative to generate more revenues to finance national development.
Ahmed said at the time: “The initiative will be implemented in the areas of achieving sustainable revenue generation to optimally collect revenues to maintain fiscal buoyancy and resilience. We are studying a possibility of a VAT increase, but you also know that the increase of VAT requires an amendment of a law.
“It is most likely the VAT increase will be selective. It will be on special items, so it won’t be across the board.
“I am sure you are already aware that there are a number of items that are exempted from VAT such as food and drugs.
“There would be a VAT increase during the course of 2019, we will announce later the items and what the rate will be.
“We will have to take a request to the National Assembly for amendment of the VAT law before it takes effect,” she added.
Similarly, in March, the immediate past Minister of Budget and National Planning, Senator Udo Udoma, hinted that the Federal Government was considering, among others, an upward review of the VAT to enable it to fund the new national minimum wage.
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