The Federal Executive Council on Wednesday approved a 7.2% new VAT rate on consumer goods which will become effective sometime in the year 2020.
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Speaking to the Statehouse correspondents after the FEC meeting in Abuja, the minister of Finance, Budget, and National Planning, Mrs. Zainab Ahmed said consultations were still ongoing over when the new tax policy would take effect.
She also said that the National Assembly would have to amend the current Value Added Tax Act before the change can be implemented and therefore the new VAT rate will not take effect until 2020.
She said, “We also reported to council and council has agreed that we start the process toward the increase of the VAT rate. We are proposing and the council has agreed, increase in the VAT rate from 5 percent to 7.2 percent. This is important because the federal government only retains 15 percent of the Value Added Tax; 85 percent is actually for the states and local governments. The states need additional revenue to be able to meet the obligations of the minimum wage.
“This process involves extensive consultations that need to be made across the country at various levels and also it will involve the review of the VAT Act. So, it is not going to be implemented immediately until the Act is reviewed.”