During the past week, there was an unexpected\nnews from the Nigeria\u2019s Federal Executive Council (FEC) of the increase in the\nValue Added Tax (VAT) rate from 5% to 7.5%. During some of my presentations in\nthe preceding months, I already shared my expectation that the Buhari\nAdministration will increase VAT after the elections, as they will be desperate\nfor revenue generation. So, this is not surprising.<\/p>\n\n\n\n
The spokespersons to the government and\ntheir social media \u201cwarlords\u201d have been constantly throwing around different\nrates being charged as VAT in different countries, and that Nigeria has the\nlowest rate around. While this is true, it is not the full truth. <\/p>\n\n\n\n
The government spokesmen forgot to read or\nmention that Ghana, Kenya and South Africa do exempt SME businesses (with\nannual revenues below the pre-defined threshold) from the VAT process and\nburden of invoicing and collecting VAT.<\/p>\n\n\n\n
The government spokesmen also forgot to\nmention that Nigeria, unlike most of those countries that they are comparing us\nwith (in terms of the VAT rate), does not allow taxpayers to offset their VAT\nliability with the VAT paid on all of their own transactions.<\/p>\n\n\n\n
It was also convenient for them to forget\nthat 5% of invoices issued by a company are required to be remitted by all\ncompanies, irrespective of whether the invoiced customer has paid or not. This\nis a barbaric law and it is very punitive for SME businesses as VAT remittances\nshould be based on the amounts actually received from customers.<\/p>\n\n\n\n
They also forgot to mention that many\ncountries have simplified the tax system for SMEs. Standard tax computation\nrequires complex computation of assessable profit, adjusted profit, tax losses,\ncapital allowances, deferred taxes and tax payable. Several forward-looking\ncountries require small and medium enterprises (below a certain revenue\nthreshold) to pay business tax at a fixed percentage of their total revenue.\nThis is one of the challenges of tax compliance by SMEs in Nigeria.<\/p>\n\n\n\n
They also forgot to acknowledge that a\nsmall business in Nigeria may have up to 50 different taxes and levies to pay\nevery year, including Education tax, PAYE, ITF, Pension, NHF, NDDC Levy, NITDA\nLevy, NCC charges, vehicle license, radio license, business premises permit,\ntinted car window permit, signage permit and to the emerging Police Trust Fund\ncharges. These are all in addition to the company income taxes.<\/p>\n\n\n\n
They also forgot that companies in Nigeria\nare required to pay \u201cminimum taxes\u201d even when they can prove that they incur\nlosses during the relevant period. The implication is that companies are eroding\ntheir capital base to pay the taxes as taxes are now being paid from capital\ninstead of it to have been from profits made by the business.<\/p>\n\n\n\n
The truth is that our entire tax system\nrequires an overhaul. However, the current administration appears to be focussed\non only implementing those updates that can generate additional government\nrevenue and hence the haphazard approach to tax policy.<\/p>\n\n\n\n
As they say in my hometown, it appears as if this administration is \u201cbypassing the treatment of leprosy and focusing on the treatment ringworm<\/em>\u201d. They need to focus on the real issues, instead of probable symptoms. This is what President Buhari and his team should do to redeem Nigerian citizens from this next level of pains.<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" During the past week, there was an unexpected news from the Nigeria\u2019s Federal Executive Council (FEC) of the increase in the Value Added Tax (VAT) rate from 5% to 7.5%. During some of my presentations in the preceding months, I already shared my expectation that the Buhari Administration will increase VAT after the elections, as […]<\/p>\n","protected":false},"author":1,"featured_media":2566,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[205,214,215,210],"tags":[290,291,292,265,293,294,295],"class_list":["post-3423","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-management","category-entrepreneurship","category-sme-businesses","category-tax-strategy","tag-paye","tag-tax","tag-tax-charge","tag-tax-compliance","tag-value-added-tax","tag-vat-increase","tag-vat-increase-in-nigeria"],"_links":{"self":[{"href":"https:\/\/bluecreekvalley.com\/woleoluyemi\/wp-json\/wp\/v2\/posts\/3423","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bluecreekvalley.com\/woleoluyemi\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bluecreekvalley.com\/woleoluyemi\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bluecreekvalley.com\/woleoluyemi\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bluecreekvalley.com\/woleoluyemi\/wp-json\/wp\/v2\/comments?post=3423"}],"version-history":[{"count":0,"href":"https:\/\/bluecreekvalley.com\/woleoluyemi\/wp-json\/wp\/v2\/posts\/3423\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bluecreekvalley.com\/woleoluyemi\/wp-json\/wp\/v2\/media\/2566"}],"wp:attachment":[{"href":"https:\/\/bluecreekvalley.com\/woleoluyemi\/wp-json\/wp\/v2\/media?parent=3423"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bluecreekvalley.com\/woleoluyemi\/wp-json\/wp\/v2\/categories?post=3423"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bluecreekvalley.com\/woleoluyemi\/wp-json\/wp\/v2\/tags?post=3423"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}