The federal government has said the commencement of the implementation of the new Value Added Tax (VAT) of 7.5 per cent is to take effect from February 1, 2020, after all the necessary administrative procedures have been completed, especially the Gazette of the recently signed 2019 Finance Act by the Federal Ministry of Justice.
This development was confirmed by the Minister for Finance, Budget and National Planning, Mrs. Zainab Ahmed, via a statement issued yesterday by her Special Adviser, Media and Communication, Mr. Yunusa Tanko Abdullahi.
The VAT increase, which is meant to help government achieve its revenue projections for the 2020 Budget (N8.155 trillion), is a part of the tax reforms included in the 2019 Finance Act. With the Act, there will be more revenue to finance key government projects especially in the areas of health, education and critical infrastructure.
Among the Finance Act strategic objectives is the supporting of micro, small and medium Enterprises (MSMEs) in line with the ease of doing business reforms such as VAT threshold.
The Finance Act also takes care of essential palliatives to support MSMEs and mitigate the impact of the VAT rate increase on the most vulnerable businesses, communities and citizens in the economy.
Some of these measures include expanding the list of VAT-exempt items (e.g. basic food items, educational materials and medical supplies); Introducing a VAT registration threshold for MSMEs with a turnover of less than N25 million per annum; Reducing the corporate tax rate for MSMEs from 30 per cent to 20 per cent for Small firms (with turnover of between N25million and N100 million per annum); and exempting micro-firms (with turnover of less than N25 million per annum) from payment of CIT
Ahmed had earlier said that, “We planned that, going forward, the annual budget will always be accompanied by Finance Bills to enable the realisation of revenue projections.
“Future Finance Bills will therefore also provide us with additional opportunities to incrementally improve the fiscal policy and regulatory/legal environment in order to further strengthen our domestic capital market, and ultimately ensure sustained and inclusive growth and development.