The Executive Chairman of the Federal Inland Revenue Service (FIRS), Mr. Babatunde Fowler, has assured that the Value Added Tax (VAT) being a consumption tax would not in any way impact negatively on ordinary poor Nigerians.
He made this clarification at the maiden edition of the Nigeria Tax Outlook (NTO) Stakeholders Roundtable Series organised by Nigeria Taxpayer Hub held in Lagos.
According to him, essentially the revenue being generated from the VAT source is channeled towards assisting the poor by providing basic amenities.
The tax expert said: “When you don’t consume certain categories of goods and services, you are not liable to pay VAT charges on those items. VAT is not charged on all medical and pharmaceutical products. It is not charged on basic food items. It is not charged on books and educational materials.
“It is not charged on baby products, fertilizers, locally produced agricultural and veterinary medicine. VAT is not charged on farming machinery and farming transportation equipment”, he added.
Fowler explained further that VAT was not usually charged on all exports, plant machinery and goods imported for use in Export Processing Zones (EPZs) and Free Trade Zones (FTZs), provided that 100 percent production of such company is for export.
Other services he listed as exempted from VAT include medical services, services rendered by community banks, mortgage Institutions, plays and performances conducted by educational institutions as part of learning and all exported services are exempted from VAT.
The FIRS boss clarified further that he told the Senate Committee on Finance last week that there was the need for increase in the number of Nigerians and companies paying VAT, adding that he didn’t make a case for 50 percent hike in VAT rate.
In addition, he disclosed that he also canvassed a reduction in Companies Income Tax (CIT) rate for small businesses so as to improve compliance.
He said: “Some people got it a bit wrong. Let me clarify some things. I understand that some people misunderstand what the VAT is. VAT is a consumption tax. If you don’t have money to purchase certain categories of goods and services and you don’t consume them, then VAT is not your problem.
“VAT is used to assist the needy. VAT provides support for the needy, not a hardship on them. Eighty-five per cent of VAT collected is shared among states for them to provide free education, free health services, provide basic amenities among others”, Fowler added.
The tax administrator pointed out that if countries like United Arab Emirates (UAE), Saudi Arabia, which are rich in oil resources were emphasizing the need for improved revenue generation through taxes, Nigeria should also explore such fiscal opportunities to fast-track development.
