The Federal Executive Council has approved 7.2 per cent as new Value Added Tax rate for the country, up from the current 5 per cent.
However, a decision has yet to be taken on the effective date of the new rate.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, who spoke with State House Correspondents after the FEC meeting in Abuja, said consultations were ongoing over when the new rate would apply.
She explained that stakeholders, including the National Assembly and the states, would have to agree on the date.
The minister stated that the VAT Act would also have to be amended by the National Assembly before the take-off date of the new rate, which she said could be sometime in 2020.
She said, “We also reported to council and council has agreed that we start the process toward the increase of the VAT rate. We are proposing and council has agreed, increase in the VAT rate from 5 per cent to 7.2 per cent. This is important because the federal government only retains 15 per cent of the VAT; 85 per cent is actually for the states and local governments. The states need additional revenue to be able to meet the obligations of the minimum wage.
“This process involves extensive consultations that need to be made across the country at various levels and also it will involve the review of the VAT Act. So, it is not going to be implemented immediately until the Act is reviewed.”