RMAFC Canvases For Upward Review of VAT from 5 % to 7.5%

(NAN) The Revenue Mobilisation and Allocation Commission (RMAFC) said Value Added Tax (VAT) needs to be reviewed upward from 5 per cent to about 7.5 per cent in other to improve the country’s revenue base.

The Chairman, RMAFC, Mr Shettima Gana said this  in Kano  at the two-day National Revenue Retreat.

Gana spoke on strategies to expand the revenue base of the government and the new sources for revenue generation.



He said that Nigeria’s current VAT rate of five per cent, charged on cost of goods and services purchased or sold, was one of the lowest in the world.

He said South Africa VAT was 14 per cent, in Togo, Senegal, Guinea and Chad of 18 per cent while Niger’s was 19 per cent.

He urged the federal government to start the process to increase this to between 7.5 per cent and 10 per cent.

The News Agency of Nigeria (NAN) reports that VAT is collected by the Federal Inland Revenue Service and shared to the three tiers of government.

Federal Government receives 15 per cent, State government, 50 per cent and Local government, 35 per cent.

Gana said VAT was a high tax revenue yielding instrument that could be used to shore-up revenue required for financing the ever-expanding public expenditure needs of all tiers of government.

He said that comprehensive research should be initiated to collect data from the Corporate Affairs Commission, banks, state ministries of trade and so on, to determine and capture all possible VAT targets.

Gana said globally, taxation was seen as the most stable source of government revenue for economic development, yet it was not properly utilised in the country.

He advised Government to introduce additional taxes, such as toll tax for the road, luxury goods tax on mansions, exotic cars, private jets and jewellries.

He also canvassed for inheritance tax to be introduced which will be paid by a person who inherits money or property from a person who has died.

Gana also harped on the importance of developing the agriculture, mining and tourism sector, which holds the potential for huge revenue stream for the government.

He urged government to enhance collection efficiency, block leakages in revenue collection and beef up revenue monitoring and intelligence gathering.

He said once all this is done, it would bring in more funds for government, expand the economy and create employment and ensure economic development.

Similarly, the Director-Revenue and Investment, office of the Accountant-General of the Federation, Mr Bakari Wadinga called for the need to harmonise Personal Income Tax (PIT) collection.

He said that  FIRS should be allowed to take over the collection of  PIT and it should be modeled after VAT collection.

He said that the present model which allows every state to collect its own PIT was ineffective, allowing  huge revenue to be lost.

“It could be recalled that prior to the introduction of VAT in 1993, in its place was the sales tax which was collected by individual state governments.

“In 1992, the total collection by the entire states of the federation put together, was less than N300 million, but by 1994, when VAT came into effect, the total VAT collections rose to N7 billion.

“By 1995 it rose to N21 billion and ten years after, VAT rose tonN222.6 billion in 2006 and over N700 billion in 2013.

“Thus, greater tax revenue could be raked in if there is collaboration on PIT collection by both states and federal government,” he said.

Wadinga said that if this is adopted, it would surely result in greater tax revenue generation for sharing.

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