N’assembly seeking bill to increase VAT from 7.5% to 10% by 2025 – Report

According to report, the national assembly is considering a bill that would increase the value-added tax (VAT) from 7.5 percent to 10%.

AFRIPOST reports that VAT is a consumption tax on products and services imposed at each level of the supply chain when value is added.

The national assembly’s executive bill, seen by TheCable on Sunday, seeks to hike the tax rate to 10% by 2025.

According to the document, the legislature proposes to raise the VAT to 12.5% between 2026 and 2029.

“VAT shall be charged on the value of all taxable supplies at the following rates (a) 2025 year of assessment 10%; (b) 2026, 2027 2028 and 2029 years of assessment 12.5% (c) 2030 year of assessment and thereafter 15%,” the document reads.

On May 8, Taiwo Oyedele, head of the presidential economic policy and tax reform committee, stated that the VAT rate should be raised.

Former Vice President Atiku Abubakar denounced the planned VAT rise as a “regressive and punitive policy” in response to the suggestion on September 8.

However, on September 9, Wale Edun, Minister of Finance, stated that the VAT rate had not been modified.

In February 2021, the International Monetary Fund (IMF) encouraged the federal government to raise VAT to at least 10% by 2022.

Meanwhile, the draft proposes lowering the corporate income tax (CIT) from 30 percent to 27.5 percent by 2025, with a further drop to 25 percent in 2026.

Companies having a turnover of less than N20 million are excluded from paying the CIT, according to the bill.

“Tax shall be levied, for each year of assessment in respect of total profits of every company, in the case of; (a) a small company, at zero percent; and (b) any other company, at the rate of-(i) 27.5% in 2025 year of assessment, and(ii) 25% from 2026 year of assessment,” the document added.

“Notwithstanding any provision of this Act or any other enactment, where, in any year of assessment, the effective tax rate of a company is less than 15%, such company shall recompute and pay an additional tax that makes its effective tax rate equal to 15%.

“The provisions of this section shall apply to (a) a company that is a constituent entity of an MNE group; and (b) any other company with an aggregate turnover of N20,000,000,000.00 and above in the relevant year of assessment.

“The companies covered under this section and the determination of the additional tax payable shall be in accordance with regulations issued by the Service.”

On June 4, Oyedele stated that the presidential committee on economic policy and tax changes advocated a 5-percent cut in the CIT.

He proposed lowering the tax rate from 30% to 25% to promote firms and investors.

Earlier this month, the federal government issued the gazetted withholding tax laws, which are set to take effect on January 1, 2025.