Nigeria’s VAT Performance Lowest In West Africa, FG Laments
The Federal government on Tuesday said the country’s Value Added Tax (VAT) performance was the lowest in the West African region, describing the development as worrisome.
While stressing the need for a change in policies, the government disclosed that the country’s VAT rate was less than one per cent to the Gross Domestic Product (GDP).
Director, Tax Policy, Federal Ministry of Finance, Budget and National Planning, Basheer Abdulkadir, raised the concern at the opening of a three-day workshop on the harmonisation of Nigeria’s VAT act with ECOWAS directives organised by the ECOWAS Commission under the context of the implementation of support Programme for Tax Transition in West Africa (PATF).
PATF is geared at improving the management of domestic taxation and ensuring better coordination in ECOWAS and West African Economic and Monetary Union (WAEMU) regions.
Abdulkadir who noted that exemptions of VAT in Nigeria was not aligned with those of ECOWAS, however, called for the exemption of a few products, goods and services from VAT so poor households could benefits from the VAT policy.
He stated: “Our VAT performance or rate is still one of the lowest. Nigeria has a VAT of less than one per cent to the GDP and this is worrisome. Also, we have the lowest VAT within the sub-region with an average of 16 per cent while the VAT rate in Nigeria is 7.5 per cent. So we need a lot of police changes in tax administration as we also need to come up with strategies to address some of these issues.
“Also, the exemptions of VAT in Nigeria is not aligned with those of the ECOWAS and we know that these exemptions are some of the issues to do with revenue mobilisation under the VAT. We need to align our exemptions with the ECOWAS directive. There is also a need to allow for tax input credits for intermediate and capital expenditures. Like I said, we need to exempt a few products, goods and services from VAT so that we allow the poor households benefits from the VAT policy.”
Speaking, the director of VAT, Federal Inland Revenue Service (FIRS), Lovette Onanuga, who observed that VAT has the potential to raise a significant amount of revenue for the government, said the FIRS was not resting on its oars to ensure that the revenue profile of Nigeria is improved.
Noting that ongoing reforms were yielding tremendous results, she said FIRS in 2021 collected a total VAT of N2.511 trillion as against the collection of N2.702 trillion in 2021.
Onanuga, while reiterating Nigeria’s commitment to ensuring the success of the PATF programme, described the workshop as timely.
She stated: “These three days’ workshops are very important. For example, the study of the Harmonisation of Nigeria’s VAT Act with ECOWAS Directives will contribute to establishing coherence in the domestic systems of taxation and the realization of the attainment of a common market and the Evaluation of VAT Performance will enable us to look more deeply into issues that will help improve VAT revenue collections.
“I, therefore, urge that we participate actively in these workshops and see ourselves as one team working for the development and progress of our country Nigeria as we commence our deliberations”
ECOWAS Director of Customs Union and Taxation, Salifou Tiemtore, commended the measures deployed by the FIRS to broaden the base of VAT by collecting VAT from informal sector traders.
He, however, called on the government to puts in place, an appropriate institutional framework before the commencement of the implementation of the initiative.
Stressing the need for the evaluation of VAT performance, Tiemtore, represented by Felix Kwakye, said the measure will outline issues that need to be addressed by the government of Nigeria to improve VAT Revenue collections.
He said: “VAT’s contribution to total tax revenue has consistently remained below 30 percent until 2020 after the introduction of the annual Finance Act in 2019 when VAT contributed 31 per cent in 2020 and 47.1 per cent in 2021. it, therefore, becomes imperative to critically carry out a study on the evaluation of VAT performance in Nigeria”, he stated.
