The Federal Executive Council (FEC) on Wednesday approved the revised National Tax Policy that will see the Value Added Tax (VAT) on luxury items like champagne increasing from the current five per cent, among other changes.
Minister of Finance, Mrs. Kemi Adeosun, disclosed this to State House correspondents at the end of the FEC meeting presided over by acting President Yemi Osinbajo.
She was joined at the press conference by the Minister of Information and Culture, Lai Mohammed, and the Minister of State, Aviation, Hadi Sirika.
The administration of former President Goodluck Jonathan had in 2014, while unveiling its austerity measures, identified some items that were to be taxed as luxury goods to include champagne, alcoholic beverages, private jets, luxury cars based on engine capacity, and yachts.
It had estimated to generate about N480bn from taxes on luxury items in the 2015 fiscal period.
Adeosun said while the implementation of the revised policy would take immediate effect, some aspects that required changes in law would be referred to the National Assembly for action.
She said Nigeria was one of the countries with the lowest Gross Domestic Product tax ratio in the world, adding that non-payment of tax was one of the biggest factors that contributed to the nation’s current economic situation, hence the need for the revised policy.
In implementing the new policy, the minister said the government would attempt to reduce the number of taxes with emphasis on indirect taxes, as well as centralising tax administration where possible.
Adeosun said, “What the committee has shown is that we should look at actually increasing VAT on some luxury items. With VAT of five per cent, we have the lowest VAT. While we don’t think VAT should be increased on basic items, if you are going to drink champagne in the United Kingdom, the VAT is 20 per cent; so, why should it be five per cent in Nigeria?
“So, they have made recommendations that we should pull out some luxury items and increase VAT on those items immediately. And I think that is a very valid and sensible suggestion, which we are going to talk to the National Assembly about to see how we can implement it.
“But as far as basic goods are concerned, no. I believe it is only fair that when you consume luxury goods, you should pay a little bit more. The National Assembly will decide the percentage.”
The minister said the objectives of the revised policy included to guide the operation and review of the tax system; provide the basis for future tax legislation and administration; provide clarity on the roles and responsibilities of stakeholders; and standard benchmark on which they would be held accountable.