Business

Taxes On Products Increases by 112%, Hit N3tn

The total amount of taxes imposed on products in the economy experienced a significant increase of 112.02 percent, going from N1.43tn in 2019 to N3.03tn in 2022. This rise coincided with the implementation of a higher Value Added Tax (VAT) rate, which increased from 5 percent in 2020 to 7.5 percent in 2022. These findings were reported in the ‘Nigerian Gross Domestic Product Report (Expenditure and Income Approach)’ by the National Bureau of Statistics, covering the relevant years.

Net taxes on products, defined as the total taxes payable on products minus any subsidies received for the product, amounted to N1.43tn in 2019 before the new VAT regime was put into effect. By 2020, with the introduction of the new VAT rate, taxes rose by 34.97 percent to N1.93tn. They further increased by 32.13 percent to N2.55tn in 2021 and experienced another 18.88 percent rise to reach N3.03tn in 2022.

The NBS commented on the growth of net taxes on products, stating that there was a 10.30 percent increase in real terms in Q3 of 2022 and an 11.18 percent increase in Q4 of 2022 compared to 6.22 percent and 67.99 percent in Q3 and Q4 of 2021, respectively.

On an annual basis, there was a growth rate of 14.19 percent in 2022, which was lower than the 25.81 percent growth in 2021. In nominal terms, the growth rate of net taxes on products stood at 24.95 percent in Q3 of 2022 and 23.71 percent in Q4 of 2022.

The slower growth in taxes in 2022 could be attributed to rising inflation and challenging economic conditions that affected the purchasing power within the country. The NBS highlighted that negative growth occurred in Q2 to Q4 of 2022 due to increasing prices and challenging economic conditions. Growth rates in Q3 and Q4 of 2022 were recorded as -5.83 percent and -12.47 percent, respectively, indicating lower rates compared to the corresponding quarters of 2021.

Since the implementation of the 7.5 percent VAT rate in February 2020, VAT revenues have risen by 108.33 percent, increasing from N1.2tn in 2019 to N2.5tn in 2022. Despite the growth in VAT revenues, there have been calls for further increases in the country’s VAT rate. The former Minister of Finance, Zainab Ahmed, proposed that the incoming government should raise the VAT rate from 7.5 percent to 10 percent.

She said, “VAT is one of the ways to increase revenue and we still have to increase VAT because, at 7.5 per cent, Nigeria has the lowest VAT rate in the world, not in Africa, in the world.”

She added, “So, tax compliance has increased. As a result, we have also adjusted our VAT rate from five per cent to 7.5, even though our target was 10 per cent. But you know how it is in Nigeria, we are targeting 10 per cent by the second year, we did so to increase revenue.”

Credit: The Punch Newspaper

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