The Business NG - October 25, 2024

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FG Announces Plan to Increase Value-Added Tax (VAT) Rate to 15%



In a move aimed at boosting local revenue mobilization and strengthening public finance buffers, the Federal Government of Nigeria has announced plans to increase the Value-Added Tax (VAT) rate from 7.5% to 15%. This significant hike is part of a broader effort to address the country's low revenue profile and improve tax compliance, particularly in the area of company income tax.

According to a document prepared by the Ministry of Finance, the government intends to "progressively increase the VAT rate from 7.5% to 15%." This move is expected to help Nigeria achieve an 18% tax-to-GDP ratio, which is the average across major economies in Africa. Currently, the country's tax-to-GDP ratio stands at 10%, one of the lowest in the Sub-Saharan Africa region.

The planned increase in VAT rate has been a topic of discussion for several months, with rumors circulating about a potential hike. In September, the Minister of Finance, Wale Edun, denied plans to increase the VAT rate to 10%, following criticism from Nigerians, including former Vice President Atiku Abubakar.

However, the latest announcement confirms that the government is moving forward with its plan to increase the VAT rate. The World Bank has also advised the federal government to raise the VAT rate to increase non-oil revenue and strengthen fiscal resources.