The Federal Executive Council on 11 September 2019 approved an increase in the value added tax (VAT) rate from 5% to 7.2%.
According to a government announcement, the process of increasing the VAT rate will involve extensive consultations with state governments and local government authorities, and others in the public and private sectors of Nigeria. The process could ultimately result in amendment of the VAT law before the new VAT rate would be effective in 2020.
The proposed increase to the VAT rate has been previously considered by the federal government, with one of the reasons in support of a VAT rate increase being that Nigeria’s 5% VAT rate is the lowest in Africa. However, those arguments do not acknowledge the difference between the VAT regimes in the other countries and Nigeria, where the VAT regime is a variant of a sales tax.
Previously, the VAT rate had increased to 10% in 2007, but the rate was returned to the 5% rate following opposition by certain sectors. Some believe that the government needs to consider this as an opportunity for a broader VAT reform in Nigeria, beyond merely increasing the VAT rate.
Read a September 2019 report [PDF 171 KB] prepared by the KPMG member firm in Nigeria
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