President Muhammadu Buhari on Tuesday presented the Finance Bill which proposes an increase of the Value Added Tax, VAT rate from 5% to 7.5% upon which the 2020 Appropriation Bill is based.
Buhari who presented the Bill alongside the the 2020 budget estimates said the additional revenues derived from the new VAT regime will be used to fund health, education and infrastructure programmes.
He stated that, as the States and Local Governments are allocated 85% of all VAT revenues, the Federal Government expect to see greater quality and efficiency in their spending in those priority areas.
The President explained that, the VAT Act already exempts pharmaceuticals, educational items, and basic commodities and these exemptions are expanded under the Finance Bill, 2019.
According to Buhari, Section 46 of the Finance Bill, 2019 specifically expands the exempt items to include: brown and white bread; cereals including maize, rice, wheat, millet, barley and sorghums, fish of all kinds; flour and starch meals.
Other items exempted under new VAT rate are fruits, nuts, pulses and vegetables of various kinds; roots such as yam, cocoyam, sweet and Irish potatoes, meat and poultry products including eggs; milk; salt and herbs of various kinds; and natural water and table water.
The Finance Bill 2019 has five strategic objectives which include: promoting fiscal equity by mitigating instances of regressive taxation; reforming domestic tax laws to align with global best practices; introducing tax incentives for investments in infrastructure and capital markets; supporting Micro, Small and Medium-sized businesses in line with the ease of doing business reforms; and raising revenues for government.
Minister of Finance, Budget and National Planning, Zainab Ahmed penultimate to the budget presentation said federal government annual budgets will now be accompanied by finance bills to ensure expenditure plans are adequately implemented,
Meanwhile, President Buhari sais he will be re-forwarding the Deep Offshore and Inland Basin Production Sharing Contract (Amendment) Bill 2018 which was submitted to the 8th National Assembly in June 2018 but was not passed into law to the 9th Assembly.
He disclosed that government estimated that this effort can generate at least 500 million US dollars additional revenue for the Federal Government in 2020, and over one billion dollars from 2021.
“Completing the reforms to the governance and fiscal terms of the Petroleum Industry will provide certainty and attract further investments into the sector. A consequence of this will be increase in jobs and in government’s take.
“I therefore seek your support in passing into law two Petroleum Industry Executive Bills I will be forwarding to you shortly. In addition, we need to quickly review the fiscal terms for deep offshore oil fields to reflect the current realities and for more revenue to accrue to the government”.