Without as much as sighting or leafing through the details of a bill that will increase the value added tax (VAT) by 50% from 5% to 7.5%, the Senate on Wednesday passed it for second reading.
Protests from two Senators: Binos Yaroe and Betty Apiafi, that they, like others, had not received printed copies of the bill did not move Senate President Ahmad Lawan who insisted on the debate.
Curiously, members debated and passed it for second reading,. The Senate Committee on Finance will now process it through a public hearing, among others, and return the bill to the full house for further processing and possible passage or rejection.
Recall that while presenting the budget estimates last month, President Muhammadu Buhari disclosed that the the 2020 Budget is based on revenue inflows from the proposed VAT increase.
In a Finance Bill that accompanied the 2020 Budget, the President asked for an from 5% to 7.5%.
According to him, the Finance Bill has five strategic objectives, in terms of achieving incremental, but necessary, changes to the nation’s fiscal laws. The objectives of the bill, he said, are:
▪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.
The President disclosed that the additional revenues through VAT will be used to fund health, education and infrastructure programmes.
“As the States and Local Governments are allocated 85% of all VAT revenues, we expect to see greater quality and efficiency in their spending in these areas as well,” he said.
Apparently in an attempt to gain acceptance and ease the passage of the bill, the government is proposing the enlargement of goods exempt from VAT.
Section 46 of the Finance Bill, 2019 expands the exempt items to include Brown and white bread; Cereals including maize, rice, wheat, millet, barley and sorghum; Fish of all kinds; Flour and starch meals; 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.
In addition, the bill proposes the raising of the threshold for VAT registration to N25 million in turnover per annum, such that the revenue authorities can focus compliance efforts on larger businesses.
This, the President said, is intended to bring relief to Micro, Small and Medium-sized businesses.
Noting that it is absolutely essential to intensify revenue generation efforts, he says the Administration remains committed to ensuring that the inconvenience associated with any fiscal policy adjustments, is moderated, such that the poor and the vulnerable, who are most at risk, do not bear the brunt of these reforms.
On Wednesday, while leading debate on the Finance bill, Senator Yahaya Abdullahi (APC, Kebbi North), said the bill essentially seeks to promote fiscal equity by mitigating instances of regressive taxation; reforming domestic laws to align with global best practices; and introducing tax incentives for investments in infrastructure and capital markets.
The bill also seeks to support small businesses in line with ongoing ease of doing business reform, and raising revenues for government by various fiscal measures, including a proposal to increase the rate of Value Added Tax from 5 percent to 7.5 percent.
According to Abdullahi, the additional revenues to be made by the Federal Government when the bill becomes law will be used to fund health, education and infrastructure programmes.
“It is absolutely essential to intensify the revenue generation efforts of this administration and its commitment to ensuring that the inconvenience associated with any fiscal policy adjustments is moderated such that the poor and the vulnerable, who are most at risk, do not bear the brunt of these reforms,” Abdullahi said