With the signing into law of the 2020 Finance Bill, the federal government says it plans to raise 8.155 trillion through the implementation of the tax reforms contained in the bill.
The Ministry of Finance made this disclosure in a statement in Abuja on Tuesday.
According to the statement, the finance bill “proposes to introduce tax reforms that will help Government achieve its revenue projections for the 2020 Budget (N8.155trillion).”
The statement explained: “though the draft Finance Bill proposes an increase of VAT rate from 5% to 7.5%, it is important to note that a large sum of money realised from the taxation would rather go to the people; the States and the Local Governments Areas (LGAs) are to get 50 percent and 35 percent respectively while only 15 percent will go to the Federal Government.”
The 2020 Finance Bill the ministry said “is a peoples Bill considering the expansion of VAT exemption list which includes: basic food items (agro and aqua based staple foods) such as additives, cereals, cooking oils, culinary herbs, fish of all kinds (other than ornamented), flour and starch, fruits, live or raw meat and poultry, milk, nuts, pulses, roots, salt, vegetables, and water; Locally manufactured sanitary towels, tuition (primary, secondary and tertiary education); and services rendered by Microfinance Banks.”
Finance Minister, Zainab Ahmed was quoted as saying that “future finance bills will also provide us with additional opportunities to incrementally improve the fiscal policy and regulatory/legal environment in order to further strengthen our domestic capital market, and ultimately ensure sustained and inclusive growth and development.”
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The finance bill she added “has also taken care of essential palliatives to support Micro Small and Medium Enterprises (MSMEs) and mitigate the impact of the VAT rate increase on the most vulnerable businesses, communities and citizens in the economy.”
Some of these measures include: Expanding the list of VAT-exempt items (e.g. basic food items, educational materials and medical supplies); Introducing a VAT registration threshold for MSMEs with a turnover of less than N25 million per annum; Reducing the corporate tax rate for MSMEs from 30 percent to 20 percent for Small firms (with turnover of between N25million and N100million per annum.); and exempting micro-firms (with turnover of less than N25million per annum).
On the implementation process of the Bill, Mrs. Ahmed said she will issue a statement in due course.