2021 VAT sets new record as figure exceeds N1.08tn

THE Federal Government generated a total of N1.08 trillion from value-added tax (VAT) in the first nine months of the year, says a document released by the National Bureau of Statistics (NBS) on Monday.                       .                                           
But considering that the VAT rate was raised by 50 per cent and payment effected in February, the figure is not as ambitious as it appears. Economists say the coronavirus outbreak together with the recent unrest took a toll on the collection.
They, however, admit that a more aggressive cashless economy campaign would reduce open market transactions and shore up the figure.                                .

According to data, N550.49 billion was generated as “non-import VAT locally” while N 277.081 billion was generated as “non-import VAT for foreign.” The balance of N248.91 came from the Nigeria Customs Service (NCS)-import VAT.
The figure was 23 per cent higher than the N876.097 billion generated in the same period last year and 33 per cent higher than N810.03 billion realised from the first three quarters of 2018.

The VAT mobilisation data show that the government realised N424.71 billion in VAT revenue in the third quarter as against N327.2 billion generated in the previous quarter (when the economy was still completely locked down), representing a 29.8 per cent increase.                        .

It also exceeded quarter one’s performance, which was estimated at N324.58 billion, by 31 percent. Unlike the previous years, the three-month pattern shows a consistent improvement in VAT revenue since the beginning of the year when the rate was increased from five to 7.5 per cent amidst public protest.
It would be recalled that the implementation of the new rate, which the Federal Government said would improve the fiscal position started in February.                            .
Though the revenue raked from VAT since the beginning is better than that of last year and the years before, further analysis of the data suggests the improvement is merely in nominal terms and does not justify the 50 per cent increment effected in February.

BY sectoral contribution analysis, manufacturing earned N47.07 billion or 11 per cent to emerge as the highest contributor to the third quarter figure. It was followed by professional services, which generated N44.01 billion, then commerce/trading with N21.2 billion                                         .

Banks/financial institutions, breweries/bottling/beverages, oil-producing, state ministries/parastatals, transport/haulage service sectors also contributed sizable portions to the revenue.  

The least performing sectors were mining, textile/garment and pharmaceutical/soaps/toiletries, which generated N64.50 million, N346.27 million and N386.16 million respectively.

Victor Ogiemwonyi, a retired investment banker and economist, said VAT performance could have been better but for the low transaction occasioned by Covid-19 outbreak. He said VAT, and tax generally, would improve as more people embrace electronic payment options.                                      .

Describing open market transactions as a clog on efforts to increase tax efficiency, Ogiemwonyi charged the government to leverage the opportunity in the digital adoption “to increase efficiency in tax assessment and collection.”

Also, Sheriffdeen Tella, a professor of economics, called for an expansion of the tax net, saying most people “do not pay while the few comply are overtaxed.” He frowned at the continued increase of the tax rate, saying it was more destructive to the economy.

Tella also saw a huge opportunity in technology-driven tax assessment and collection. He believes tax consultants should be used on an “ad hoc basis” to establish the baselines while the routine assessment and collection could be done using technology. This, he said, would reduce the cost of collection and increase efficiency.                           .

MEANWHILE, another document published by NBS at the weekend says the Federation Account Allocation Committee (FAAC) disbursed the sum of N682.06bn to the three tiers of government in September. The disbursement is from the revenue, including VAT, generated in August. According to the report, the amount comprised N531.83bn from the statutory account and N150.23bn from Valued Added Tax (VAT).

The Federal Government received a total of N272.90b from the N682.06 billion while states received N197.65b. The local governments got N147.42b while N30.88b was shared among the oil-producing states as 13 percent derivation

The Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS) and the Department of Petroleum Resources (DPR) received N6.66bn, N13.48bn and N5.70bn respectively being the cost of revenue collections.

Other beneficiaries were the Police Trust Fund which received N2.66 billion and the North East Development Commission which was allocated N4.51 billion.  

“Further breakdown of revenue allocation distribution to the Federal Government of Nigeria (FGN) revealed that the sum of N196.56b was disbursed to the FGN consolidated revenue account; N4.78b shared as a share of derivation and ecology; N2.39b as stabilisation fund; N8.03b for the development of natural resources; and N6.12b to the Federal Capital Territory (FCT) Abuja,” the report noted.

The document also outlined the local government across the federation, the amount each received and applicable deductions.