By Tony Obiechina, Abuja
The implementation of the Value Added Tax (VAT) of 7.5 percent is to take effect from February 1, 2020, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed has announced.
The Accountant General of the Federation, Mr Ahmed Idris had on Wednesday told journalists that the implementation of the new VAT rate commenced on Monday when the president signed the Finance Bill into Law.
However speaking shortly before she inaugurated the new chairman and board members of the Federal Inland Revenue Service on Thursday, the minister said the new rate will take effect after all the necessary administrative procedures have been completed, especially the gazette of the Act by the Federal Ministry of Justice.
“I want to announce that the effective date for the VAT increase from 5percent to 7.5% will be 1st of February, 2020
“Once a bill is signed into law, it takes effect immediately but it is to note that there are certain administrative procedures and formalities to be finalized before commencement. Recall the VAT increase which is meant to help the government achieve its revenue projections for the 2020 Budget (N8.155 trillion) is a part of the tax reforms included in the 2019 Finance Act. With the Act, there will be more revenue to finance key government projects especially in the areas of health, education and critical infrastructure”.
According to the minister, the new date has put to rest the speculations about the effective take-off date for the new VAT regime.
The minister while inaugurating the new board reminded the chairman of his members that being members of a country tax administration comes with huge responsibility and they must work hard to show that their appointments were well deserved.
She challenged the new board to come up with ideas and strategies that will improve the country’s tax administration.
The new chairman of the FIRS board, Mr. Muhammed Nami in his inaugural speech assured the Finance Minister that he would bring his experience and expertise to bear in his new portfolio and called on other members of the board to give him unalloyed loyalty and cooperation to give the desired result.
Nami announced a 13-point priority areas the new board will address in his first 100 days in the office including capacity building for the FIRS staff, building new enforcement strategies, restructuring and reposting audit functions, review of structures and corporate strategic retreats.
Others are overhauling critical I’m infrastructure, reposting of collections reports get and accounting and reposition of the large and medium taxpayers offices am going others
Among the Finance Act strategic objectives is the support of micro, small and medium enterprises (MSMEs) in line with the ease of doing business reforms such as VAT threshold”, the minister stated.
Mrs Ahmed, had earlier said that: “We planned that, going forward, the annual budget will always be accompanied by Finance Bills to enable the realization of revenue projections. “Future Finance Bills will therefore also provide us with additional opportunities to incrementally improve the fiscal policy and regulatory/legal environment in order to further strengthen our domestic capital market, and ultimately ensure sustained and inclusive growth and development.”
The minister noted that the Finance Act also takes care of essential palliatives to support MSMEs and mitigate the impact of the VAT rate increase on the most vulnerable businesses, communities, and citizens in the economy.
Some of these measures include: Expanding the list of VAT-exempt items (e.g. basic food items, educational materials, and medical supplies); Introducing a VAT registration threshold for MSMEs with a turnover of less than N25 million per annum; Reducing the corporate tax rate for MSMEs from 30 percent to 20 percent for small firms (with turnover of between N25million and N100million per annum.); and exempting micro-firms (with turnover of less than N25million per annum).
