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Published On: Thu, Feb 2nd, 2017

FG To Impose Higher Tax On Luxury Goods

Beginning this February, the Federal Government would impose 10 to 20 percent hike in Value Added Tax (VAT), according to a draft policy on the floor of the National Assembly for approval.

The VAT rate could go as high as 10 percent or 20 percent across board and could take full effect as soon as the 2017 budget, which recently scaled through first and second readings at the floor of the National Assembly, gets passed.

This new policy is coming amid the prevailing economic recession in the country, where cost of goods and services have skyrocketed and forex crisis has further dampened the purchasing power of majority of Nigerians.

The decision was reached at the Federal Executive Council (FEC) meeting chaired by Acting President Yemi Osinbajo on Wednesday.

Although the implementation may still be subject to the ratification of the National Assembly, current VAT rate on goods and services in Nigeria is pegged at five percent with several firms operating in the country alleged to evade tax payments.

Kemi Adeosun, Minister of Finance, who briefed State House correspondents on the outcome of the meeting, hinged this development on abysmal low level of tax to the Gross Domestic Product (GDP) at six percent as well as the need to entrench an efficient tax system.

According to the minister, “What the National Tax Policy Review Committee has shown is that we should look at actually increasing VAT on some luxury items. VAT of five percent in this country is the lowest and whilst we don’t think VAT should be increased on basic items. If you are going to drink champagne for instance, you drink champagne in the UK and VAT is 20% why should it be 5% in Nigeria.

“So the National Tax Policy Review Committee has made recommendations that we should pull out some luxury items and increase VAT on those items immediately.

“I think that is a very valid and sensible suggestion which we are going to talk to the National Assembly to see how we can implement it. But as far as basic goods are concerned, no. I believe it is only fair that when you consume luxury goods you should pay a little bit more. The National Assembly will decide on the percentage”.

On hunger ravaging majority of underprivileged Nigerians, especially since the country plunged into recession, Minister of Information and Culture, Lai Mohammed, said government was not oblivious of the sufferings citizens.

He said this realisation accounted for FEC’s approval of an inter-ministerial task force on food security.

Members of the task force are expected to comb the entire country with a view to finding out reasons for inflation and price differences in basic food items, including uncovering pre-disposing factors why food wastages occur.

Members of the inter-ministerial committee are made up of ministers of Agriculture, Audu Ogbe; Finance, Kemi Adeosun; Water Resources, Abdullahi Adamu and Transportation, Rotimi Amaechi.

“FEC considered several memos and approvals were given. The major highlight is that council resolved to set up task force on food security.

“Government is quite concerned about the rising cost of food items and the fact that more often than not even when these products are available, if it does reach the market, they are sold at very exorbitant prices.

“So, the task force on food security would ensure that an end is put to wastages that occur and with tons and tons of produce sitting down in the farms rotting or in the markets getting rotten.

“The important thing is to look at what areas of intervention the government can make. The intervention can be in the area of subsidy in transportation, that is being worked out but this goes to show that government is very much concerned about the rising cost of food price and we are responding to it.

“The committee hopefully is expected to report back to council next week and concrete actions would be taken. Clearly government is concerned and is trying to do something to bring it down”.

Meanwhile, in view of the imminent closure of Nnamdi Azikiwe International Airport, Abuja, FEC equally approved the procurement of some coaches to boost rail transportation from Kaduna to Abuja.

Minister of State for Aviation, Hadi Sirika, who made the disclosure, said among the categories of coaches to be procured, include two first class coaches for baggage and six for long distance economy classes.

“This is to boost rail transportation on the Abuja-Kaduna standard gauge railway to improve on passengers and goods, especially with the impending closure of the Abuja airport.

“This is to also complement the other airport we are doing in Kaduna and to increase our capacity to handle passengers during the Abuja airport closure.”

“Another memo which also got approval was for joint briefing offices in all 21 Federal Government airports across the country. They include Lagos, Kano, Abuja, Port Harcourt, Ilorin, Sokoto, Maiduguri, Jos, Yola, Calabar, Enugu, Owerri, Kaduna, Benin, Osubi-Warri, Katsina, Zaira, Minna, Bauchi, Ibadan and Akure.”

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