7.5% VAT increase not extra burden for consumers, MSMEs – Osinbajo

Isola Moses

Despite the extensive hue and cry as well as criticisms that greeted the recent increase in the Value Added Tax (VAT) from initial 5 percent to current 7.5 percent on vatable products and services in Nigeria, Vice-President (Prof.) Yemi Osinbajo has said that the current 7.5 percent VAT is the lowest in the whole of Africa.

The Nation reports that Prof. Osinbajo stated that the increase is not meant to create extra burden for Micro, Small and Medium Enterprises (MSMEs) in the country.

The Vice-President disclosed this Monday, in Lafia, Nasarawa State capital, at the National Micro, Small and Medium Enterprises Clinics for Viable Enterprises.

“Many people have said this is a higher tax rate for consumers and has complications on those who are trading as well. You must remember that this is the lowest VAT rate in the whole of Africa.

“Why it is true is that Ghana has reduced its VAT rate from 15 to 12.5%. Ours is 7.5%,” he said.

Osinbajo added that small and medium companies with a turnover of less than N25 million do not have to register for VAT in the economy.

“So that way, the government is not creating any extra burden for the small and medium companies.

“In addition to reducing the impact of VAT on consumers, several basic items such as food, drugs and educational items … there is no payment of VAT on food, drugs and educational items,” he stressed.

In terms of the benefits of the latest Vat increase to states, the Vice-President maintained that the upside increase would mean additional revenues would now go to the states to be able to pay the new minimum wage.

“There is another upside increase in the VAT. That is additional revenues will now go to the states from VAT,” he said.

He added that states now will be able to earn additional revenues so that they can do additional things, at least to begin to pay the new minimum wage.

This way, it will improve consumer spending as well, he said.

“I think despite the increase in VAT, there are so many inbuilt advantages that are for the small businesses to thrive.

“On our part at the federal level, we are hoping on the establishment of Shared Facilities across the country,” he stated.

Prof. Osinbajo expressed confidence in the economic transformation programme of the Governor Abdullahi Sule of Nasarawa State-led administration.

He charged the small businesses in the state to take the opportunity offered by the Nasarawa State Government in this regard.

Governor Sule said that Nasarawa State had embraced the Federal Government’s initiative of Economic Recovery and Growth Plan (ERGP).

He said: “It is for this reason that, we developed the Nasarawa Economic Development Strategy (NEDS) and continued to initiate policies and programmes, geared towards the creation of conducive business environment for business to strive, poverty reduction, as well as job creation in the state.”

“In this regard, we constituted the Nasarawa State Enabling Business Environment Council (NEBEC) in line with the Federal Government framework to drive reforms on ease of doing business.”