FG mulls additional 2.5% VAT rate in 2021

The Federal Government on Tuesday unveiled plans to introduce additional 2.5% Value Added Tax (VAT) rate in 2021 fiscal year as part of efforts aimed at increasing revenue generation.

Minister of Finance, Budget and National Planning, Dr Zainab Ahmed disclosed this while presenting the overview of the 2020 fiscal outcomes and budget implementation/2021 budget defence to the House Committee on Finance, chaired by Hon. James Faleke.

According to documents presented to the Committee, as at the end of Q3 2020, Federal Government’s revenue available for budget funding (excluding GOEs) was N2.83 trillion, 70% of target. Federal Government share of oil revenues was N1.203 trillion (representing 158% performance, over and above the prorated sum in the revised 2020 budget) while non-oil tax revenues totalled N927.47 billion (76% of revised target).

Companies Income Tax (CIT) and Value Added Tax (VAT) collections were N486.68 billion and N137.03 billion, representing 79% and 64% respectively of the prorate revised targets for the period. Customs collections were N303.76 billion (78% of revised target). Other revenues amounted to N697.75 billion, of which independent revenues was N390.50 billion.

On the expenditure side, N9.97 trillion was appropriated (excluding GOEs and project tied loans), while N7.09 trillion (representing 94.7% of the prorate N7.48 trillion) was spent. Of the expenditure, N2.54 trillion was for debt service and N2.43 trillion for personnel cost, including pensions. As at end of September 2020, N873.9 billion had been released for capital expenditure.

While responding to various questions raised by the lawmakers, Dr Ahmed explained that: “Release on Service Wide Votes for two items, the first one is pension fund the second one is a support fund for universities – we have been disbursements to. On pension, we have a provision in the 2021 budget of N150 billion but will still sit down with PENCOM on how to disburse.

“Mr. President has approved that the Oronsoye report be implemented and has directed the SGF and Head of Service to carry out that process. Many agencies have come on stream and the size of government expenses has increased. The essence is to cut down expenses by fusing some Agencies and reducing the number of agencies we have.

“The 2021 budget of the Ministry of Finance is about automation to enhance the efficiency of revenue collection in the agencies. Very soon we will be. Currently, we have an automation process that enables us to capture the revenue. We have monthly reconciliation exercise in all the major agencies to confirm that the revenue as reported are complete. We set up the National Social Investment Programme, N279.10 billion has so far been released,” the Minister noted.

According to the document seen by Tribune Online, some of the presidential directives to be adopted include: capping cost-to-revenue ratio of Government Owned Enterprises (GoEs) to a maximum of 60% to 70%; deregulation of price of petroleum product, ongoing verification exercise with IPPIS, implementation of service-based tariffs, the introduction of tax expenditure statement in 2021-2023 MTEF to dimension the cost of tax waivers; support the NESP developed under the leadership of the Vice President; introduction of N2.3 trillion stimulus focus on job-intensive projects and $3.4 billion IMF Emergency Support to mitigate the effects of COVID-19.

While responding to the controversy on the N100 billion allegedly removed from the 2021 budget proposal submitted by the Minister of Power, she said: “On the N100 billion Mambilla power project, let me just inform this meeting that the Ministry of Finance, Budget and National Planning based on the MTEF that you have passed put in the cost cycler the budget ceiling for every Ministry. They are now expected to make their budget within that ceiling. The Ministry of Power didn’t have Mambilla in their submission we do not provide programmes that go into the budget for Ministries.”

She argued that: “It was possible that the Minister of Power, Mamman Saleh does not understand the budgeting dynamics which is operated by the ‘Envelope system’. Once the MTEF is passed, it allows your envelope. Power didn’t have Mambilla in the budget, we interacted, we didn’t remove it, maybe Power Minister didn’t understand,” she stressed.

While reacting to question on the ongoing Police reforms vis-à-vis payment of enhanced police salaries, general welfare in response to the #EndSARS protest, she explained that the funding will be accommodated in the 2021 budget presently under consideration in the National Assembly.

Dr. Ahmed further explained that the Ministry was awaiting reports from the Federal Government’s Police reforms Committee and would review the current budget estimates with the view to accommodate any financial commitment recommended from reports of the reforms that will cater for enhanced police salaries and general welfare of the officers and men.

“On the Police Service Reforms, we know what is going on at Income and Wages Commission, what we are hoping is that the review will be completed quickly enough so that why the appropriation process is going on, the revised salaries are included in the 2021. We will come by revised or supplementary estimates but we must wait for the outcome and final report from the government’s reforms Committee.

“If it’s not completed we will contemplate doing amendment or supplementary budget. They should complete quickly so that it can go into the 2021 budget. Making some provisions to bring in 20 (units of) 100,000 hectares of land per state in food production and also to build roads that provide access for farmers to move from farm to markets to reduce post-harvest losses.

“We have before parliament a request for approval for a loan of US$1.2 billion from Brazilian Government is meant to lend to businessmen to for tractors, plants at all levels,” as part of efforts geared towards addressing the challenges across the agriculture value chain.

In his address, Chairman, House Committee on Finance, Hon. James Faleke said: “Based on fiscal assumptions and parameters in the budget proposals, total federally distributable revenue is estimated at N8.433 trillion in 2021. Total revenue available to fund the 2021 federal budget is estimated at N7.88 trillion. This includes grants and aid of N354.85 billion as well as the revenues of sixty government-owned enterprises. Oil revenue is projected at N2.01 trillion. Non-oil revenue is estimated at N1.49 trillion.

“The prevailing economic problem occasioned by the coronavirus is further accentuated by the recent #EndSARS protest, with so many Federal Government properties damaged during the crises are now yearning for immediate attention.

“We have serious problems in our hands and these calls for collective and collaborative efforts from all stakeholders in or efforts to revamp and rebuild the Nigerian economy in the interest of the generality of the Nigerian people and the future generation.

“As we do this significant and important national assignment of budget hearing I call on you to bear the foregoing in mind for effective and result oriented legislative impact by this committee.

“As we review the 2020 budget performance, it is instructive to note the current global economic crunch against the backdrops of the 2021 estimates presented by Mr President in such a way that we shall uphold the constitution and also meet the expectations of the Nigerian people in line with the oath we took as members of the 9th National Assembly.

“As a Parliament, it is our constitutional duty to consider the budget proposals/estimates. We may adopt, amend or even initiate a new proposal having regard to the overall interest of the Nigerian people,” he stressed. – Tribune.

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