Nigeria plans VAT increase in push to raise non-oil revenues

Published 12/09/2019, 13:28
Updated 12/09/2019, 13:40
© Reuters.  Nigeria plans VAT increase in push to raise non-oil revenues

By Felix Onuah

ABUJA, Sept 12 (Reuters) - Nigeria plans to increase

value-added tax on goods, the finance minister said, as Africa's

biggest oil exporter seeks to reduce its reliance on crude

sales.

Zainab Ahmed, addressing journalists late on Wednesday after

a cabinet meeting, said the government proposed raising VAT next

year to 7.2% - up from 5%. The current level is one of the

lowest in the world.

The planned rise must be approved by parliament before it

can become law.

President Muhammadu Buhari's government has repeatedly said

it wants to boost non-oil revenues since oil sales make up 90%

of foreign exchange receipts. Raising more money from taxes has

proved difficult in a country where so many small business are

not registered.

Ahmed said the cabinet approved the proposed VAT rise when

it met on Wednesday.

"This is important because the federal government only

retains 15% of the VAT, 85% is actually for the states and local

government. The states need additional revenue to be able to

meet the obligations of the minimum wage," she said.

Nigeria's minimum wage was increased in April to 30,000

naira ($98) a month from 18,000. Prior to the minimum wage rise the government had argued

that many of Nigeria's 36 states struggled to pay salaries of

state employees.

The proposed VAT hike is part of a broader drive to increase

tax revenues. Last week Nigeria's tax chief told Reuters 5.32

trillion naira ($17.39 billion) was collected in taxes in 2018

and his office was targeting 8.9 trillion naira this

year.

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