January 19, 2020

Sanitary pads, 19 others excluded from VAT hike

Zainab Ahmed

Minister of Finance, Budget and National Planning, Zainab Ahmed

Johnbosco Agbakwuru – Abuja

The Federal Government has listed the sanitary pads among the 20 basic food items exempted from the new Valued Added Tax (VAT) increase expected to take effect from February.

President Muhammadu Buhari last week signed the Finance Act to increase the government’s revenue base.

The new law, according to the government will promote fiscal equity and support Micro, Small and Medium Enterprises (MSMES).

A statement issued by the Senior Special Assistant on Media and Publicity to the Vice President, Laolu Akande, said the VAT increase would not lead to a rising cost of living for Nigerians.

The statement read:  “In a bid to ensure that the cost of living does not rise for Nigerians because of the changes in the Value-Added Tax, several basic food items, locally manufactured sanitary towels, pads and tuition relating to nursery, primary, secondary and tertiary education have been added to the exemption list of goods and services on the VAT under the Finance Bill 2019, signed by President Muhammadu Buhari last week, on the 13th January 2020.

“Amongst other benefits, the law will consolidate efforts already made in creating the enabling environment for improved private sector participation and contribution to the economy as well as boost states’ revenues.

“To allay fears that low-income persons and companies will be marginalized by the new law, reduce the burden of taxation on vulnerable segments, and promote equitable taxation, the Finance Act 2019 has extended the list of goods and services exempted from VAT. The additional exemptions include the following:

“Basic food items – Additives (honey), bread, cereals, cooking oils, culinary herbs, fish, flour and starch, fruits (fresh or dried), live or raw meat and poultry, milk, nuts, pulses, roots, salt, vegetables, water (natural water and table water)

” Locally manufactured sanitary towels, pads or tampons. Services rendered by microfinance banks Tuition relating to the nursery, primary, secondary and tertiary education.”

“The increased new VAT rate of 7.5 percent is still the lowest in Africa, and one of the lowest anywhere in the world. (South Africa VAT: 15 percent; Ghana: 12.5 percent; Kenya: 16 percent; Egypt: 14 percent; Rwanda: 18 percent and Senegal: 18 percent)

“Under Nigeria’s revenue sharing formula, 85 percent of collected VAT goes to States and Local Governments. This means that the bulk of additional VAT revenues accruing from the increase will go towards enabling States and Local Governments to meet their obligations to citizens, including the new minimum wage as already noted by State Governors. Before now, the Buhari administration had firmly resisted previous suggestions to raise VAT.”

“The new Finance Act exempts Businesses with turnover below 25 million from VAT payments.”