President Muhammadu Buhari led administration in its policy of Value Added Tax(VAT) increase from 5% to 7.5%(increase of 2.5%) on Sunday has exempted Basic food items like additives (honey), bread, cereals, cooking oils, culinary herbs, fish, flour and starch, fruits (fresh or dried), live or raw meat and poultry, milk, nuts, pulses, roots, salt, vegetables, water (natural water and table water).
“Also exempted are locally-manufactured sanitary towels, pads or tampons, services rendered by microfinance banks and tuition relating to nursery, primary, secondary and tertiary education.”
This was done to reduce the fear of Nigerians that the increase will cause further poverty and sufferings. The increase was necessary to further increase the revenue might of the country through taxation.
President Muhammadu Buhari last week signed the Finance Bill with one of the components being the hike of VAT rate by 2.5 percent.
However, despite the protest by some Nigerians on the increase, Nigeria’s VAT rate of 7.5 percent remains the lowest in Africa and one of the lowest in the world.
In South Africa, the VAT rate is 15 percent; Ghana (12.5 percent); Kenya (16 percent); Egypt (14 percent); Rwanda (18 percent) and Senegal 18 percent).
“The new Act includes a provision that grants to all companies engaged in agricultural production in Nigeria an initial tax-free period of five years, renewable for an additional three years.
“With the new Act, the N50 Stamp Duty charge is now applicable only to transactions amounting to N10,000 and above, a significant increase on the former threshold of N1,000.
The new VAT regime will go into effect on February 1.