The Executive Chairman, Federal Inland Revenue Service (FIRS), Mr Babatunde Fowler, says Value Added Tax (VAT) is a consumption tax designed to support the poor and not to create hardship for them.
FIRS Spokesman, Wahab Gbadamosi, said on Tuesday in a statement that Fowler made the clarification in Lagos at the maiden Nigeria Tax Outlook (NTO) Stakeholders Roundtable Series organised by Nigeria Taxpayer Hub.
“I was at a programme at the Senate. I was talking about projection in 2019 for the VAT. And I was asked a question about what my personal views were about the VAT and some people got it a bit wrong. Let me clarify some things.
“I understand that some people misunderstand what the VAT is. VAT is a consumption tax. If you don’t have money to purchase certain categories of goods and services and you don’t consume them, then VAT is not your problem.
“The VAT is used to assist the needy. VAT provides support for the needy, not a hardship on them, 85 per cent of VAT collected is shared among states for them to provide free education, free health services, provide basic amenities among others.
“We can see what the Federal Government is doing with the tax money. Look at the rail system, the Abuja-Kaduna rail is completed.
“VAT contributed to Lagos-Ibadan expressway, education system, the school feeding program among others. If at the state level, your government cannot justify the taxes you pay to them, you have the right to vote them out in the next four years,” Fowler said.
Fowler was also quoted as saying that VAT was charged on consumption and capacity to consume.
“When you don’t consume certain categories of goods and services, you are not liable to pay VAT charges on those items.
“VAT is not charged on all medical and pharmaceutical products. It is not charged on basic food items. It is not charged on books and educational materials.
“It is not charged on baby products, fertilizers, locally produced agricultural and veterinary medicine. VAT is not charged on farming machinery and farming transportation equipment.
“Other products that have not VAT charges are all exports, plant machinery and goods imported for use in Export Processing Zones and free trade zone, provided that 100 per cent production of such company is for export.
“Other services exempted from VAT are medical services, services rendered by Community Banks, People’s Bank and Mortgage Institutions, plays and performances conducted by educational institutions as part of learning and all exported services are exempted from VAT,” he said.
Fowler explained that the revenue generated from VAT was channeled towards assisting the poor by providing basic amenities that were needed in the society.
The chairman said that if countries like United Arab Emirate (UAE), Saudi Arabia which were rich in oil resources would be laying emphasis on taxation, then Nigeria should also emulate them.
According to him, Nigeria’s economy is only picking up in recent times because former administrations over-looked tax reforms and depended on the mineral resources.