Nigeria’s Federal government is considering hiking Value Added Tax (VAT) by up to 50 percent to raise funds for the implementation of the new national minimum wage, Budget and National Planning Minister, Udo Udoma, and Executive Chairman, Federal Inland Revenue Service, FIRS, Babatunde Fowler, announced on Tuesday before the Senate Committee on Finance headed by John Enoh.
The two officials appeared before the Senate committee to explain details of the 2019-2021 Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).
The Senate reportedly passed the bill seeking to increase Nigeria’s minimum wage from N18,000 to N30,000 for a third reading. The bill has already been passed by the House of Representatives. Notably, both houses must agree and the president must sign the bill before it becomes a law.
According to Mr Udoma, the increase in VAT will create the required funds to meet the new wage obligation being approved by the National Assembly. They hinted that the tax increases were inevitable, as implementing the new national minimum wage will further increase the size of the 2019 budget which is already in deficit.
Mr Fowler said the proposed increased VAT would be between 6.75 per cent and 7.25 per cent as against the current 5 per cent, which would mean an increase of between 35 per cent and 50 per cent. He added that the government is also planning to increase the Company Income Tax (CIT), and Petroleum Profit Tax (PPT).
“By the end of this year, we should be ready for an increase in the VAT,” Fowler said, reported Vanguard. “I can certainly see an increase in VAT of at least 35 percent to 50 percent this year based on our enforcement activities. There certainly will be an increase in Company Income Tax and also on Petroleum Profit Tax.”
As far as workers’ new minimum wage scale is concerned, Mr. Udoma said the new scale would be subject to negotiation which is due to begin soon.
Don’t forget to check with The Chief Observer for every update on Nigeria’s new national minimum wage.
