FG sets February as implementation of 7.5% VAT
The Federal Government says it would commence implementation of the 7.5 per cent value added tax, VAT, on February 1, 2020.
Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, disclosed this while inaugurating the Board of the Federal Inland Revenue Service, FIRS, on Thursday in Abuja.
Ahmed’s clarification comes on the heels of an earlier announcement by the Accountant-General of the Federation, AGF, Mr. Ahmed Idris, that the implementation had commenced following the assent of President Muhammadu Buhari to the Finance Bill, 2019.
Idris had said his office commenced implementation of the Act as it had become law.
“On Wednesday, I saw a payment which was done in December last year and when I checked the payment, the VAT on it was five per cent and I said no it must be 7.5 per cent because the five per cent VAT has been overtaken by events because that is the law as at today.
“So, I stopped it and asked them to go and recharge at 7.5 per cent. You cannot implement something unless you have the instrument whether administrative or legal for it to be implemented,” he said.
But the Minister of Finance, Budget and National Planning, Ahmed, on Thursday said the effective date for the VAT increase from 5-7.5% will be the 1st of February 2020.
“I want to state that one of the key provisions in the finance act 2019 that have elicited a lot of interest is the increase in the VAT from 5% to 7.5%, and to remind us all, the finance bill has made copious provisions to improve the ease of doing business; so we have a category of companies that have turnover of 25% and below that will be paying no taxes at all, and also we have reduced tax rates for companies that have turnover from 25 million to 100 million from 30% to 30%.
“The essence of this is to encourage formalization of businesses from the informal sector and also to encourage businesses to grow and become more productive, thereby increasing employment and also meeting the commitment of Mr. President to remove 100 million Nigerians out of poverty over the next 10 years.
According to the minister, the Finance Act had made provisions to support Micro, Small and Medium Enterprises, MSMEs, and cushioned the impact of the VAT rate increase on companies in a bid to increase employment and boost the economy.
Recall that in September 2019, the federal government raised VAT from 5 per cent to 7.5 per cent but however exempted companies with less than N25 million annual turnover of company income tax.