Nigeria among countries with lowest VAT rate in Africa – Osinbajo
Amid the growing concerns and anxieties among business owners over the Financial Act signed by President Muhammadu Buhari and the increase in the Value Added Tax (VAT), the Federal Government has again given further insight into the new financial system, saying it is not meant to create extra burden for Micro, Small and Medium Enterprises (MSMEs) in Nigeria.
Vice President Yemi Osinbajo gave the clarification at the National Micro, Small and Medium Enterprises Clinics for Viable Enterprises in Lafia, the Nasarawa State capital.
Nigeria is currently among nations’ with lowest VAT rate of 7.5 percent in the entire African continent, he said.
According to Osinbajo, “Despite the increase in VAT, there is so many inbuilt advantages for small businesses to thrive. The small businesses can take advantage of the Financial Act to make their businesses even grow better.”
Osinbajo said the gradual reduction in interest rate through the Central Bank of Nigeria (CBN) was one of the Federal Government fresh initiatives in creating a more favourable environment for small businesses to thrive.
He explained the modifications on restriction to access to Treasury Bill and the Open Market Operation of the CBN had brought six income yield down to between 5 percent and 6 percent.
“This will help greatly in reducing interest rate for commercial loan in the country. We expect to see interest rate for commercial loan will go down gradually and very soon it might able to get to single digit interest rate for commercial loan,” Osinbajo maintained
He added, “the new incentive under the Financial Act exempt small companies with the turnover of N2.5 million a year. Any company that has a turnover less than N25 million in a year is now exempted from paying income tax.
“So, all the small companies do not have to pay cooperation tax because their turnover is less than N25 million.
“Companies that have a turnover of between 25 million and 100 million a year will now pay income tax at a lower rate of 20%, which is almost 10% off what the rate use to be.”
The vice president said, “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.
He went further to mention that small and medium companies with a turnover of less than N25 million do not have to register for VAT.
“So that way, the government is not creating any extra burden for the small and medium companies.
“In addition to reduce the impact of VAT on consumers, several basic items such as food, drugs and educational items. So there is no payment of VAT on food, drugs and educational items.”
The vice president continued that there was another upside increase in the VAT as additional revenues would now go to the states to be able to pay the new minimum wage.
He said: “There is another upside increase in the VAT. This is additional revenues will now go to the states from VAT.
“The states can now 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 consumers spending as well.
“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 expressed confidence on the economic transformation programme of the Governor Abdullahi Sule’s led administration; hence he charged the small businesses in the state to take advantage of the opportunity offered by the Nasarawa State government.
He expressed the determination of President Buhari to create a Nigeria in which small business owners are nurtured and encourage to thrive and prosper.
Governor Sule said Nasarawa had keyed into 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.”
In his determination to support the Micro, Small and Medium Enterprises and to make Nasarawa State the best destination for business, the governor stated that the state government has commenced the conceptualization of an Industrial Cluster within the Abuja-Nasarawa corridors for small industries to thrive and serve as a major hub for small industries with seamless start-up businesses.”