Federal Government has projected ambitious plans to increase revenue accruing from Value Added Tax (VAT) from an average of N35 trillion in 2024, to N40 trillion in 2025 and N45 trillion in 2026 fiscal years, respectively. The breakdown…
Sunday, 5 November 2023
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Federal Government has projected ambitious plans to increase revenue accruing from Value Added Tax (VAT) from an average of N35 trillion in 2024, to N40 trillion in 2025 and N45 trillion in 2026 fiscal years, respectively. The breakdown…
The breakdown of the 3-year projected revenue was contained in the 2024-2026 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP
According to the document transmitted by President Bola Tinubu to the National Assembly last week, the “VAT was projected using estimated aggregate nominal consumption, taking into account vatable items and collection efficiency. Consumption expenditure on which VAT is charged is assumed to increase from an average of N35 trillion in 2024, to N40 trillion in 2025 and N45 trillion in 2026, after adjusting for exemptions, zero-rated items and companies whose turnover falls below the N25 million threshold.
“Like the CIT, more VAT payers are expected to be brought into the tax net with the effective implementation of the provisions of the various Finance Acts. The VAT projections over the medium-term are based on holding the rate at 7.5%. Raising the VAT rate however remains a policy option for government to keep in view over the medium.”
With regards to the projected ‘Non-Oil revenue vaseline assumptions’, the document stated that: “In view of the declining revenue from crude of, Government has continued to implement various reform measures to further widen the revenue base, modernize and further improve tax administration, and enhance non-oil revenue collections.
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“The medium-term non-oil revenue forecasts are based on sustenance and acceleration of these reform efforts by the new Administration in order to enhance the contribution of non-oil revenue sources to funding the FGN budget.
“The medium term non-oil revenue estimates were premised on anticipated growth in the different tax bases, the effective tax rate, and the projected tax collection efficiency. Tax rates are assumed to remain largely the same during the period.”
Through the Customs Collections: import Duties, Excise, Fees and Special Levies, Federal Government stated that “Import duty projections are based on the cost, insurance and freight (CIF) value of imports, applicable tariffs, and a projected efficiency factor.
“The growth of the nominal tax base is assumed to be driven by tax elasticity in the medium term. Other considerations include the foreign exchange rate, effective implementation of extant tax laws, the implementation of the Common External Tariff (CET) 2022-2026, and renewed focus on the implementation of the Africa Continental Free Trade Agreement (AfCFTA).”
In the same vein, Federal Government is expected to improve its revenue through the Companies Income Tax (CIT).
“The CIT projections are based on estimated nominal GOP, Companies’ Profitability Ratio, and further improvement in collection efficiency. The Gross Operating Profits of firms for which CIT forecast was derived are assumed to average N9.3 trillion for 2024, 10.6 trillion for 2025 and 11.2 trillion for 2026, after adjusting for firms in the informal sector.
“Estimates were derived taking into consideration significant growth of domestic economic activities as well as the effective implementation of the National Development Plan 2021 – 2025. Other important assumptions include significant improvement in the Nigerian business and investment environment and successful broadening of the tax net. More importantly, the historical growth in the volume of online transactions is expected to be sustained.
“The VAT was projected using estimated aggregate nominal consumption, taking into account vatable items and collection efficiency. Consumption expenditure on which VAT is charged is assumed to increase from an average of N35 trillion in 2024, to N40 trillion in 2025 and N45 trillion in 2026, after adjusting for exemptions, zero-rated items and companies whose turnover falls below the N25 million threshold.
Source:
Federal Government has projected ambitious plans to increase revenue accruing from Value Added Tax (VAT) from an average of N35 trillion in 2024, to N40 trillion in 2025 and N45 trillion in 2026 fiscal years, respectively.
— Imran Muhammad (@Imranmuhdz) November 6, 2023
The breakdown of the 3-year projected revenue was… pic.twitter.com/gewlQRkVaH
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