The Federal Executive Council has in Abuja approved a revised National Tax Policy to address low taxation in the country.
The Minister of Finance, Mrs Kemi Adeosun made this known at a joint press briefing with the Minister of Information and Culture and Minister of State for Aviation Hadi Sirika after the Federal Executive Council meeting.
The meeting was chaired by Acting President Yemi Osinbajo.
Nigeria’s tax contribution to the Gross Domestic Product (GDP) is said to be the lowest in the world with about six per cent.
Its Value added Tax is also said to be the lowest in the world at five per cent.
The minister, however, said under the new tax policy, consumers of luxury goods would pay a higher Value Added Tax (VAT).
According to her, the new VAT per centage for the luxury items is still subject to approval of the National Assembly.
She expressed the hope that the new revised tax policy, which was recommended by the ministry’s National Policy Tax Review Committee in August 2016, would entrench an efficient tax system.
This according to her, will also address the low level of tax contribution to the Gross Domestic Product (GDP).
”What the committee has shown is that we should look at actually increasing VAT on some luxury items.
“VAT of five percent, we have lowest VAT and whilst we don’t think VAT should be increased on basic items, if you are going to drink champagne you drink Champagne in the UK and VAT is 20 per cent 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 to see how we can implement it.
“But as far as basic goods are concerned, 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 per centage,’’ she said.
She said the approved tax policy would be jointly implemented by the federal, state and local governments, adding that other agencies of government like the Federal Inland Revenue Service (FIRS), the media, Civil Society Organisations and others would be involved in the implementation.
According to the minister, the main thrust of the tax policy is to establish fundamental principles to guide and orderly develop the Nigerian tax system toward meeting its objectives.
It also recognises the primacy of the taxpayers and clearly states their rights and duties.
It equally reinforces the role of the ministry of finance in the formulation, coordination and implementation of tax policy on an ongoing basis.
The policy is expected to guide the operation and review of the tax system and provide the basis for future tax legislation and administration.