The increase of the Value Added Tax (VAT) rate from 5 per cent to 7.5 per cent has taken effect following the signing into law the Finance Bill, 2019, by President Muhammadu Buhari on Monday.
The 2020 Appropriation Act is based on this new VAT rate.
President Buhari announced his assent to the bill in a tweet on his handle @Mbuhari on Monday.
“I am pleased to announce that this morning, I signed into law the Finance Bill, 2019,” he tweeted after giving his assent to the bill at the presidential villa, Abuja.
Buhari submitted the bill to the joint session of the National Assembly on 14 October 2019.
The Senate passed the bill in November 2019.
The objectives of the bill as sent by the president were to promote fiscal equity; reform domestic tax laws; introduce tax incentives for investments in infrastructure and capital markets; support small businesses, and raise revenues for the Government.
It contained vast changes to the Companies Income Tax Act, VAT Act, Petroleum Profits Tax Act (PPTA), Personal Income Tax Act, Capital Gains Tax Act (CGTA), Customs and Excise Tariff Etc. (Consolidation) Act and Stamp Duties Act.
A statement later issued by presidential spokesman, Femi Adesina, explained that the signing of the bill by the president was sequel to its passage by the National Assembly and subsequent forwarding by the legislature to the President for assent.
The statement recalled that President Buhari, while presenting both the 2020 Appropriation Bill and the Finance Bill to the National Assembly, had said: “This Finance Bill has five strategic objectives, in terms of achieving incremental, but necessary, changes to our fiscal laws.
“These objectives are; Promoting fiscal equity by mitigating instances of regressive taxation; Reforming domestic tax laws to align with global best practices; Introducing tax incentives for investments in infrastructure and capital markets; Supporting Micro, Small and Medium-sized businesses in line with our Ease of Doing Business Reforms; and Raising Revenues for Government.
“The draft Finance Bill proposes an increase of the VAT rate from five per cent to 7.5 per cent, as such, the 2020 Appropriation Bill is based on this new VAT rate,” he added.
The statement noted that with the assent, there will be more revenue to finance key government projects especially in the areas of health, education and critical infrastructure.