VAT: Analysts Task Govt On Creating Favourable Business Conditions

While latest data on Value Added Tax (VAT) released by the National Bureau of Statistics (NBS) shows an improvement in revenue mobilisation, “the government must implement reforms and initiatives to create friendly and favourable business conditions,” analysts at FBNQuest Research have said.

The analysts stated this while reacting to the NBS quarterly report on VAT for Q2’24, which shows that the federation’s gross collections from VAT increased by +9 per cent q/q and +100 per cent y/y to about N1.6 trillion in Q2’24.

According to the analysts, “the robust y/y growth in Q2 represents the most significant y/y expansion in VAT collections for as far back as we can track.

Cumulatively, the total VAT figures amounted to roughly N3.0 trillion in H2’24, implying an increase of 39 per cent y/y compared with N2.1 trillion received in H2 2023.”

Reviewing the NBS Q2, 2024 VAT data, the analysts stated that the, “domestic (non-import) VAT was the largest contributor to the VAT revenue, accounting for about 51 per cent of the total VAT revenue. In absolute terms, it increased by 20 per cent q/q and 55 per cent y/y to N792.6 billion.”

They further said: “Foreign (non-import) VAT and import VAT made up the remaining balance of the total VAT collection, contributing around N395.7 bn and N373.0 billion, respectively.

“In terms of sectoral contribution, the manufacturing sector remained the largest source of total VAT revenue, generating about N183.9 billion. It also accounted for 12 per cent of total VAT collections during the quarter.

“Information and communication ranked as the secondlargest contributor to the total VAT revenue at N140.8 billion, implying an increase of 22 per cent q/q and 30 per cent y/y. “However, the sector’s GDP growth has slowed for the seventh consecutive quarter, falling from 10.53 per cent y/y in Q3’22 to 4.44 per cent y/y in Q2 2024.”

The analysts said: “Telecommunication network operators, the largest segment within the sector, continue to contend with rising operational costs from high inflation and foreign exchange (FX)-related expenses caused by the depreciation of the naira.”

Pointing out that mining and quarrying, public administration, as well as the financial and insurance services sectors, were the other top five contributors to VAT revenue in Q2 24- “contributing around N137.2 billion, N84.9 billion, and N82.6 billion, respectively, to the total VAT revenue,” he said:

“Despite the improvement in revenue mobilisation, especially from non-oil sources, the government must implement reforms and initiatives to create friendly and favourable business conditions.”

New Telegraph reports that the Minister of Finance and Coordinating Minister of the Economy. Mr. Wale Edun, last week, refuted speculation in some quarters that the Federal Government had increased the VAT rate from 7.5 per cent to 10 per cent.

The speculation was triggered by the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele’s statement, during a recent television interview that his committee had proposed a 2.5 per cent increase in VAT, from 7.5 per cent to 10 per cent by 2025, subject to the approval of the National Assembly.

However, Edun, in a statement issued by the Director, Information and Public Relations, Federal Ministry of Finance, Mohammed Manga, explained that the current VAT remains unchanged.