Between January and December 2019, the Federal Government generated the sum of N1.17tn from Value Added Tax.
When compared to the target of N1.7tn set by the Federal Government in the 2019 budget, the amount represents a shortfall of about N530bn.
A breakdown of the N1.17tn VAT revenue, as contained in the Central Bank of Nigeria economic report, showed that the sum of N301.62bn was generated by the Federal Inland Revenue Service in the first quarter of 2019.
However, during the second quarter, the VAT revenue dropped by N6.13bn from the first quarter figure of N301.62bn to N295.49bn.
In the third quarter of the year, VAT revenue also witnessed a decline of N4.62bn from N295.49bn in the second quarter to N290.87bn in the third quarter.
The trend also continued in the fourth quarter of 2019 as VAT revenue dropped by N2.92bn from N290.87bn in the third quarter to N287.93bn.
The inability of the government to raise the much needed revenue to finance its operation was one of the reasons for the increase in the Value Added Tax from five per cent to 7.5 per cent.
The 7.5 per cent VAT rate, which the government started implementing on February 1 is being planned to generate about N2.08tn revenue in the 2020 fiscal period.
Out of this N2.08tn, the Federal Government alone will receive about N315.47bn representing 15 per cent, states N1.04tn representing 50 per cent while the Local Government Councils will get N751.43bn or 35 per cent.
The VAT increase, which is meant to help government achieve its revenue projections for the 2020 budget is a part of the tax reforms included in the 2019 Finance Act.
With the Act, it is expected that there will be more revenue to finance key government projects, especially in the areas of health, education and critical infrastructure.
Among the strategic objectives of the Finance Act is the supporting of Micro, Small and Medium Enterprises in line with the ease of doing business reforms such as VAT threshold.
Speaking during a breakfast programme on the Nigerian Television Authority monitored by Breaking Times, the Executive Chairman of the FIRS, Mohammed Nami, urged all businesses to ensure that they registered with the FIRS for VAT purpose.
He said any business that failed to obey the tax law would have to face the wrath of the tax authorities.
He said, “It’s your statutory responsibility whether you just register today with Corporate Affairs Commission, to come over to the Federal Inland Revenue to register as VAT agent. That is the first responsibility.
“The second responsibility is that you should keep a good record of your transactions because if you don’t keep good records and eventually during the compliance process and monitoring process it is discovered that you have traded well above N25m, the taxes will be paid in arrears.”
He said the VAT Act already exempted pharmaceuticals, educational items, and basic commodities.
Some of the basic food commodities, according to section 46, are brown and white bread, cereals including maize, rice, wheat, millet, barley and sorghum, and fish of all kinds.
Others are flour and starch meals, fruits, nuts, pulses and vegetables of various kinds, roots such as yam, cocoyam, sweet and Irish potatoes, meat and poultry products including eggs, milk, salt and herbs of various kinds, and natural water and table water.