N4.2trn VAT revenue boosts govt 19-year spending
BusinessDay trend watch showed that VAT revenues have been on steady growth since 1994 from N8.20billion in that year to N20.32billion in 1995. It grew to N32.47billion in 1996; N14.74billion in 1997; N38.28billion in 1998; N47.68billion in 1999; and N60.68 billion in 2000.
The growth trend has been sustained ever since. The nation received N91.75billion in 2001; N108.6billion in 2002; N131.42billion in 2003; N163.3billion in 2004; N192.7billion in 2005; N232.7billion in 2006; N312.6billion in 2007; N401.7billion in 2008; N481.4billion in 2009; N564.89billion in 2010; N659.15billion in 2011; and the latest N710.5billion VAT revenue in 2012.
Value Added Tax, simply called goods and services tax, is an indirect tax collected from someone other than the person who actually bears the cost of the tax. VAT returns and payments are normally made monthly to the local VAT office on or before the 30th day of the month following that in which the supply was made.
The growing VAT revenues are coming at a time when the nation’s revenue from oil exports is also on the rise, growing 46 percent from 2009 level to N9.15 trillion ($59 billion) in 2010. Nigeria earned $196 billion from oil and gas exports in the four years from 2007 to 2010, the National Bureau of Statistics office said recently.
The Financial Audit Report of the oil and gas sector by the Nigeria Extractive Industries Transparency Initiative (NEITI) also revealed that a total of $143.5 billion was earned by Nigeria as revenue from the sector between 2009 and 2011. The money was earned mainly from Value Added Tax (VAT).
From Value Added Tax revenue, four percent cost of collection is allocated to Federal Inland Revenue Service. After this, the net VAT revenue is shared among the three tiers of government in the proportion of the Federal Government (15 percent); State Governments (50 percent); and Local Government Councils (35 percent).
Since its invention by a French economist Maurice Laure’ as far back as 1954, in January 1993, Federal Government following the report of a study group set up in 1991 to review the entire tax system agreed to introduce VAT in Nigeria and its administration took effect in January 1994.
As the Federal Government through the Federal Inland Revenue Service (FIRS) takes various steps towards reforming Nigeria’s tax system, pronouncements around increasing the Value Added Tax (VAT) rate from current 5 percent to 10 percent has generated a lot of controversy among stakeholders.
African countries’ VAT rate presented at the international tax dialogue conference by International Bureau of Fiscal Documentation (IBFD) showed that in Botswana is 10 percent, Cameroon (18.7 percent), Cape –Verde (15 percent), Chad (18 percent), Congo (18 percent), Côte d’Ivoire (20 percent), Guinea (18 percent), Gabon (18 percent), Ghana (12.5 percent), Kenya (16 percent), Lesotho (14 percent) , Madagascar (20 percent), Malawi (17.5 percent), Mauritius (15 percent), Morocco (20 percent), Mozambique (17 percent), Namibia (15 percent), Nigeria (5 percent), Rwanda (18 percent), Senegal (17 percent), South Africa (14 percent), Tanzania (20 percent), Tunisia (18 percent), Uganda (17 percent), Zambia (17.5 percent) and Zimbabwe (15 percent).
Taking a look at VAT rates across African countries, Taiwo Oyedele, Tax partner, PwC Nigeria, believes that diversity of VAT laws make compliance difficult for multinationals. This was noted in the fourth edition of the report titled ‘Overview of VAT in Africa’ compiled by PwC VAT specialists.
“Nigeria does not have a well-administered VAT system that is in line with international norms, although the VAT rate of 5 percent is much lower than the global average rate of between 18 percent and 20 percent. A significant number of African countries, including Nigeria, South Africa and Botswana, have a single rate system in place, which is easier to administer,” Oyedele had noted.
Businessday
