Nigeria’s Tax Revenue: Plucking the low hanging fruits!

Recently, the National Bureau of Statistics (NBS) published Nigeria’s H1-19 Value Added Tax (VAT) report. According to the report, VAT revenue rose 12.0% y/y to N600.9bn, in H1-19. This as the Federal Inland Revenue Service (FIRS) continues to double efforts to increase tax revenue, amid FG’s dwindling and volatile oil revenue.

Recent comments from the FIRS chairman on the introduction of VAT charges on online transactions by January 2020, showed that VAT is at the centre of the tax revenue drive. While we await official circulars from the FIRS, the agency had since clarified that only online businesses that do not currently pay VAT are liable. With the above in mind, we see this as a low-hanging fruit that would help shore up government revenue going forward. Also, if properly implemented, we do not expect this to worsen the progress already witnessed on online payment, as VAT is also paid on cash transactions. However, with 18 of 28 sectorial classifications contributing below 1.0% each to aggregate VAT generated in H1-19, the need to boost productivity across the economy comes to fore. Beyond VAT, mobilizing tax revenue in Nigeria is also hinged on finding a way to capture Nigeria’s massive informal sector where the contribution to the tax basket has been largely sub-optimal while doubling down on efforts to clamp down on tax evaders.

 

Source: Brandspur

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