The Federal Government has raised VAT from five per cent to 7.5 per cent. It will take effect from January. But, firms making a turnover of N25 million and below will be exempted.
He stated this while presenting his N10.33 trillion 2020 budget estimates to the joint sitting of the National Assembly in Abuja.
The essence of the exemption, according to him, is to bring “relief for our micro, small and medium size businesses”, so that “revenue authorities can focus their compliance efforts on large businesses.”
The President said “the draft Finance Bill proposes an increase of the VAT rate from 5 per cent to 7.5 per cent. As such, the 2020 Appropriation Bill is based on this new VAT rate. The additional revenues will be used to fund health, education and infrastructure programmes. As the States and Local Governments are allocated 85 per cent of all VAT revenues, we expect to see greater quality and efficiency in their spending in these areas as well.
“The VAT Act already exempts pharmaceuticals, educational items, and basic commodities, which exemptions we are expanding under the Finance Bill, 2019.
This Finance Bill, he said, has five strategic objectives, in terms of achieving incremental, but necessary, changes to the country’s fiscal laws.
He listed the objectives of the proposed Finance Bill to include: a. Promoting fiscal equity by mitigating instances of regressive taxation; b. Reforming domestic tax laws to align with global best practices; c. Introducing tax incentives for investments in infrastructure and capital markets; d. Supporting Micro, Small and Medium-sized businesses in line with our Ease of Doing Business Reforms; and e. Raising Revenues for Government.
By presenting the Budget on Tuesday, the Federal Government expects a return to the January to December Budget cycle.