FG Begins Implementation of 7.5% VAT Rate

Accountant General of the Federation, Mr. Ahmed Idris

Accountant General of the Federation, Mr. Ahmed Idris

  • Says new rate applies to payments on pre-increment transactions

James Emejo in Abuja

The federal government has commenced the immediate implementation of some aspects of the Finance Act with the implementation of 7.5 per cent Value Added Tax (VAT) on delayed payments on government transactions.

The Accountant General of the Federation (AGF), Mr. Ahmed Idris, Thursday said all approved payments transactions not concluded before the passage of the Act would now be subjected to the new VAT charge.

Idris told reporters at an interactive session in Abuja that with President Muhammadu Buhari assenting to the bill, it had become a law and it was imperative for his office to obey the law.

He said he had to stop the payment of a certain amount on Tuesday because the transaction was processed based on five per cent VAT.
According to him, payment for the transaction, which occurred last year, would not be made until the 7.5 per cent VAT is factored into the cost of transaction.

When asked if it was right to impose VAT of 7.5 per cent on a business transaction that had already been done before the signing of the finance bill into law, he said VAT was deductible at the point of payment and not the point of purchase

He said: “You cannot implement a budget unless the National Assembly passes it and Mr. President signs it. So, the decision to increase VAT was debated and members of the public were sensitised and nobody can start deducting that VAT unless the bill is signed.

“Just yesterday, I saw a payment, which was done last year in December and when I checked the payments the VAT rate was five per cent and I said No – if I am to finalise this now, it must be 7.5 per cent- the five per cent VAT had been overtaken by events.

“So, it’s being paid this year. So, a couple of payments which for one reason or the other couldn’t be made now would suffer 7.5 per cent because that is the law as at today.

“So, I stopped it and asked them to go and recharge 7.5 per cent. That is the luck of the person or bad luck or whatever we call it but the law has to be obeyed.”

He also said the Buhari administration had finalised plans towards deterring and preventing individuals from engaging in corruption, adding that this remained critical to achieving success in public finance administration.

He said it was not enough to prosecute and jail people for corruption, adding that preventive instruments are key.

He said: “Fighting corruption is not just for Magu (acting chairman of the Economic and Financial Crimes Commission) to arrest people and take them to court: we should also prepare grounds to prevent it from happening. And that’s the first step.

“It’s not about jailing; jailing is the last thing- it was permitted and that’s why somebody is prosecuted and jailed- don’t allow, give room or prepare ground- make the ground impossible for somebody to commit corruption and I think that’s what the government is doing.”

Idris added that the various financial reform programmes embarked upon by the Buhari administration were aimed towards achieving transparency and accountability in the management of public funds.

He said the initiatives were also geared towards keeping the public duly informed about how public funds were being managed, generated and spent as well as fighting corruption in the system.

The AGF noted that the implementation of the Treasury Single Account (TSA), International Public Sector Accounting Standards (IPSAS) and Integrated Payroll and Personnel Information System (IPPIS) were only some of the laudable tools which government had deployed to enhance transparency and accountability in public finance administration.

He said: “All these are steps in the right direction and for government to do this or even approve of this, I think the government should be applauded and I think government means well because whoever says come and see what I am doing, I am not locking the doors, come in and see the expenditure, the revenues; I think that government deserves commendation and it means government is serious about fighting corruption.”

He noted that resistance remained one of the key challenges to efforts aimed at sanitising the public financial system.
“You cannot be open if you are not transparent; and you cannot be transparent if you are not accountable.

“The public has a duty to be informed and enlightened on what is going on particularly where funds of the public are involved and managed and expended.
“And that is exactly what we are trying to do in most of these reform initiatives to be transparent, open and accountable as well as to ensure that the public is aware of what is going on with the funds and resources that we are managing on their behalf; reminding all of us that this is the treasury of the nation where resources come in and resources go out for programmes,” he stated.

According to him, the transparency portal, recently launched by Buhari to compel disclosure by agencies of government, is one of the ideas conceived by the treasury and will be effective going forward for improving transparency and accountability in the system.

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