By Damilare Adeleye
A bill proposing an increase in the value-added tax (VAT) from 7.5 percent to 10 percent is currently at the disposal of the National Assembly.
VAT refers to a consumption tax on goods and services levied at each stage of the supply chain where value is added.
In the executive bill seen on Sunday, the national assembly is seeking to raise the tax rate to 10 percent by 2025.
The legislature also intends to increase the VAT to 12.5 percent by 2026 through 2029.
“VAT shall be charged on the value of all taxable supplies at the following rates (a) 2025 year of assessment 10%; (b) 2026, 2027 2028 and 2029 years of assessment 12.5% (c) 2030 year of assessment and thereafter 15%,” the document read.
On May 8, Taiwo Oyedele, chairman of the presidential committee on fiscal policy and tax reforms, had said the VAT rate needs to be increased.
Meanwhile, the bill also proposes a reduction in the corporate income tax (CIT) to 27.5 percent by 2025 — down from 30 percent — and a further cut to 25 percent by 2026.Companies with less than N20 million turnover are exempted from paying the CIT, according to the bill.
“Tax shall be levied, for each year of assessment in respect of total profits of every company, in the case of; (a) a small company, at zero percent; and (b) any other company, at the rate of-(i) 27.5% in 2025 year of assessment, and(ii) 25% from 2026 year of assessment,” the document added.
“Notwithstanding any provision of this Act or any other enactment, where, in any year of assessment, the effective tax rate of a company is less than 15%, such company shall recompute and pay an additional tax that makes its effective tax rate equal to 15%.
“The provisions of this section shall apply to (a) a company that is a constituent entity of an MNE group; and (b) any other company with an aggregate turnover of N20,000,000,000.00 and above in the relevant year of assessment.
“The companies covered under this section and the determination of the additional tax payable shall be in accordance with regulations issued by the Service.”