The federal government has approved a new national tax policy presented by the Minister of Finance, Kemi Adeosun.
The new tax policy, which seeks to address the low tax regime in the country is, however, subject to approval by the National Assembly.
Introduced in 1994 by the military government, Nigeria’s current Value Added Tax (VAT) rate is one of the lowest in the world.
The finance minister who disclosed this after the presentation of the new tax policy to the Federal Executive Council (FEC) presided over by acting president Yemi Osinbajo, said the tax review committee had among other things, specifically advised the government to consider increasing VAT on some luxury items, including champagne.
Adeosun further stated that the new tax policy will also entrench an efficient tax system and address the key fiscal challenge of low level of tax contribution to the Gross Domestic Product, which is at six per cent.
“What the committee has shown is that we should look at actually increasing the value added tax (VAT) on some luxury items.
“At five per cent we have lowest VAT and whilst we don’t think VAT should be increased on basic items, if you are going to drink champagne… you drink champagne in the UK and VAT is 20 per cent, why should it be five per cent in Nigeria. So they have made recommendations that we should pull out some luxury items and increase VAT on those items immediately.
“And I think that is a very valid and sensible suggestion which we are going to talk to the National Assembly about, to see how we can implement it; but as far as basic goods are concerned, no. I believe it is only fair that when you consume luxury goods, you should pay a little bit more. The National Assembly will decide the percentage,” she stated.
Adeosun noted that the tax system should be geared towards wealth creation, employment and diversification, and focused on indirect taxation.
She further stated that it will also have special arrangements and other incentives that will help create a competitive edge and forge international and regional treaties.
According to the minister, the desired goals of the tax review committee include a mandate for the Independent National Electoral Commission (INEC) to mandate political parties to articulate tax agenda during elections; a dedicated tax policy website; the establishment of an office of tax simplification, and the setting up of a tax policy implementation committee.
Others are ensuring only one revenue agency per level of government; setting aside a uniform day in the year as a National Tax Day; national and state assemblies establishing a taxation committee, and the review of the Joint Tax Board (JTB) Act to give it a mandate beyond its current advisory role.
It is also to “establish administrative framework for amnesty and whistle blowing; develop KPIs (key performance indicators) for Nigeria to attain a top 50 spot on ease of paying taxes by 2020; ministries, departments and agencies (MDAs) to report to the Ministry of Finance (MoF) and MoF to give periodic reports to NE,” she said.
The minister further noted that the main thrust of the tax policy was to establish fundamental principles to guide an orderly development of the Nigeria tax system towards meeting its overall objectives, adding that the policy recognises the primacy of the tax payers and clearly states their rights and duties.
“The policy equally reinforces the role of the Ministry of Finance in the formulation, coordination and implementation of tax policy on an ongoing basis. With each stakeholder playing its part, the policy should lead to significant improvement in the tax system,” she said.