As falling oil prices force government into policy
redirection towards tax revenue, Value Added Tax (VAT) –a form of consumption
tax, yielded approximately N802.95bn into Nigeria’s VAT pool account in 2014.
In 2013, actual VAT revenue was N802.67bn
against government’s VAT revenue target of N945.28bn. The Federal Inland
Revenue Service (FIRS) surpassed the preceding year VAT revenue by N28million;
while it came short of the 2014 government target of N849.33billion by N46.38bn
or 5.46%.
BusinessDay checks show that in the
first-quarter (Q1) of 2014, Value Added Tax yielded N212.38bn into government
coffers. In Q1’14, the VAT revenue target was set at N211.36bn.
Out of the N212.38bn actual VAT revenue in
Q1’14, N41.27bn was realised by Nigerian Customs Service (NCS) as import VAT
revenue; while N171.11bn was revenue from non-import VAT.
In Q2’14, VAT yielded N197.25bn into
government treasury. NCS import VAT revenue was N50.36bn, while non-import VAT
revenue was N146.89bn.
Nigeria, Africa’s largest economy by GDP-size
recognizes VAT pool account which is the subject of horizontal revenue sharing.
Section 40 of the Value Added Tax Act, as
amended, provides that proceeds of VAT account should be allocated on the basis
of 50 percent to the States and the Federal Capital Territory (FCT); 35 percent
to the Local Governments and 15 percent to the Federal Government.
The provision of Section 40 further provides
for the principle of derivation of not less than 20 percent to be reflected in
the share of States and Local Governments.
While many African countries are considering
putting VAT into their tax systems, analysts say, Nigeria VAT administration
system falls below international norms.
Nigeria’s VAT rate of 5% is much lower than
the global average rate of between 18% and 20%.
A look at some African countries VAT rate
shows: Algeria (17%); Benin Republic (18%); Botswana (12%); Burkina Faso
((18%); Cameroon (19.25%); Cape Verde (15%); Central African Republic (19%);
Egypt (10% (standard), 25% (luxury goods); Gabon (18%); Kenya (16%); Mauritius
(15%); Morocco (20%); Nigeria (5%); Senegal (20%); South Africa (14%);Tunisia
(18%); and Zambia (17.5%.
In the third-quarter (Q3) 2014, VAT revenue
was N192.08bn. Details of this figure show that Nigerian Customs Service import
VAT revenue was N48.76bn while non-import VAT revenue stood at N143.31bn.
In Q4’14, N201.24bn revenue came from VAT.
Non-import VAT revenue was N155.58bn, while N45.66bn was realised by the
Nigeria Customs Service as import VAT.
In a recent move which received approval and
knocks from a cross section of Nigerians, Ngozi Okonjo-Iweala, the country’s
finance minister and coordinating minister of economy, said N480bn would be
generated into federal government coffers through taxes on luxury items as well
as stoppage of abuses of investment incentives, such as exemptions and waivers.
“We need to reform our tax system. Tax
systems are meant to be responsive. We need a ‘living tax system’. Government
should be able to treat tax as a fiscal stimulus, particularly as a country
seeking growth”, said Eben Akinyemi, principal partner Stransact Partners.
Akinyemi said, “We need to reduce taxes and
not going back to the people who find it difficult to pay taxes. Government
should first enforce compliance of tax, than introducing more taxes.”
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