E-Financial
Presidential Committee Recommends another Hike in VAT
Presidential Committee on Fiscal Policy and Tax Reforms has recommended an upward review of the Value Added Tax (VAT) from the present 7.5 per cent.
Taiwo Oyedele, chairman of the committee, also suggested that the VAT revenue sharing formula should be reviewed.
He spoke at a policy exposure and impact assessment session organised by the committee, according to reports.
The proposal is coming amid opposition to several new taxes and levies like the 0.5 per cent for cybersecurity and stamp duty on mortgage loans experts, chambers of commerce and the organised labour say will create additional burden on Nigerians and the businesses which are struggling to survive.
But Oyedele allayed the fears over the impending review, saying it would not affect the poor and small business owners.
While it was not clear the percentage of the proposed increase, 7.5 per cent is currently paid as VAT.
The federal government had increased VAT from five per cent to 7.5 per cent in February, 2020, following the passage of the 2020 Finance Act.
He further said, “Nigeria’s economy is more than 50 per cent in services, and if I just stop at this, many states will be broke because VAT collection will go down by more than 50 per cent, and it won’t even fly.
“Therefore, we need to adjust the VAT rate upward. We would ensure that it doesn’t affect businesses. The only thing is to look at basic consumption from food, education, medical services and accommodation will carry zero per cent VAT. So, for the poor and small businesses, no VAT.
“We have spoken to businesses about it and they won’t increase the products’ prices. We want to make sure when we do VAT reform, no one will increase the price of commodities. We will work the mathematics with the private sector.”
The committee, Oyedele added, had also proposed a review of the state and local governments’ share of VAT revenue to 90 per cent, as well as reducing the federal government’s share from 15 per cent to 10 per cent.
Section 40 of the VAT Act provides that the federal government gets 15 per cent, states share 50 per cent and local governments share the balance of 35 per cent.
He added that, “We are proposing that the federal government’s portion should be reduced from 15 per cent to 10 per cent. States’ portion will be increased, but they would share 90 per cent with local governments.”
He explained that the proposed adjustment of the sharing formula in favour of states was due to the fact that VAT was a tax of the states.
He said. “In 1986, we had sales tax collected by states. The military came up with VAT in 1993 and stopped sales tax, so they said it would collect VAT and return 15 per cent as cost of collection, and that was how the 15 per cent charged today came about. But we think it is too much.”
Nigeria Deposit Insurance Corporation (NDIC) has said that it has obtained Winding up Orders for 96 out of 183 microfinance and primary mortgage banks whose licenses were revoked by the Central Bank of Nigeria (CBN) in May 2023.
Bello Hassa, managing director, NDIC, stated this at a sensitisation seminar for Judges of the Federal High Court in Lagos organised by the NDIC, to enlighten the judiciary on the intricacies of the banking industry.
Hassan said, “As at date, the Corporation had obtained Winding up Orders for 96 out of 183 Micro Finance and Primary Mortgage Banks whose licenses were revoked by the CBN in May 2023, in less than one Year of revocation.”
He added that the NDIC was committed to fulfilling its mandate of protecting depositors through bank supervision, failure resolution and liquidation so as to boost confidence in the financial system.
Speaking on the role that the judiciary plays in the fulfillment of the mandate, Hassan said, “We recognise the judiciary as one of our critical stakeholders. With this, when cases are brought before them, they can receive accelerated hearing and proclamation of Justice.”
Citing some of the achievements from previous editions of the seminar, Hassan said that instances where liquidation-related litigations experienced delays were reduced.
Central Bank of Nigeria (CBN) has withdrawn its earlier circular directing financial institutions to implement the national 0.5 per cent cyber security levy after the policy was largely resisted.
The withdrawal of the circular was announced via a statement signed by Haruna Mustafa, director, Financial Policy and Regulation, Department and Chibuzo Efobi, director, Payment System Management Department.
The apex bank confirmed the suspension in a circular issued on May 17, 2024 with reference number PSMD/DIR/PUB/LAB/017/005 addressed to commercial banks, mobile money operators, and other financial institutions.
In an earlier circular issued on May 6, 2024 with reference PSMD/DIR/PUB/LAB/017/004, the bank mandated financial institutions to charge a 0.5 per cent levy on all electronic transactions.
President Bola Tinubu last week ordered the suspension of the National Cybersecurity levy.
The Association of Bureau De Change Operators of Nigeria (ABCON) has called for the Securities and Exchange Commission (SEC) guidance and collaboration in harmonising the peer-to-peer forex sector in the country.
At an official courtesy visit to the newly appointed SEC Director-General, Dr. Timi Agama, the President of Association of Bureau de Change Operators of Nigeria (ABCON), Aminu Gwadabe, who congratulated the SEC D-G on his appointment, observed that SEC regulates the sector that continues to threaten the existence of BDCs in Nigeria through online virtual transactions platforms which give access to millions of Nigerians to trade in foreign exchange without trace and accountability.
He also explained that ABCON has invested in requisite technology to ensure the continued existence of the business and the preservation of the integrity of the sub-sector, stressing that the future of BDC’s business was digital currency. The ABCON boss said that the meeting with the SEC DG and his executive board was a follow up to an earlier online virtual consultation.
Gwadabe explained that ABCON, the umbrella body for all licensed retail foreign exchange dealers, was established in 1991 to liaise with regulators, relevant stakeholders and security agencies for a transparent retail end forex market.
Gwadabe said: “As at today, there are over 34 million Nigerians dealing in digital currency and the number is rising by about nine percent with a huge market of $9 billion annually. There are thousands of multichannel virtual currency FX platforms and none is indigenous to Nigeria, adding that P2P represents individual-to-individual transaction.
“To automate the entire foreign exchange retail market, ABCON has partnered with the Commodities Exchange Board in building the platform knowing that they have sources of foreign exchange. ABCON is willing to work with SEC towards achieving full automation of the retail end of the foreign exchange market in Nigeria.
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