It is a mission accomplished for the Federal Government of Nigeria. Mission accomplished for projecting that raising VAT to 7.5% will mean more revenue for the government to run with as the country’s total sum is now put at ₦1.53 trillion revenue from Value Added Tax (VAT) in 2020, up by 29.3% when compared to N1.18 trillion recorded in 2019.
This is revealed by the Sectorial value-added tax report, recently released by the National Bureau of Statistics (NBS).
According to the report, VAT revenue grew by 29.3% compared to N1.18 trillion recorded in 2019 and 38.2% increase as against N₦.11 trillion in 2018.
Taxmobile.Online brings you below a sector by sector breakdown of VAT generated in the year under view:
In 2020, professional services generated the highest amount of VAT with ₦162.32 billion remittances, closely followed by other manufacturing sectors with ₦154.15 billion.
Non-import VAT generated locally grew by 30.5% in 2020 to stand at ₦763.01 billion as against ₦584.6 billion received in 2019.
Non-import foreign VAT also stood at ₦420.4 billion. This indicates an increase of 17% when compared to N359.5 billion generated in the previous year.
Import VAT generated by Nigeria Customs Service jumped by 44.6% to stand at ₦347.7 billion as against ₦240.5 billion recorded in 2019.
Out of the twenty-eight (28) sectors, twenty-four (24) of them recorded positive growth in VAT remittance, while only four sectors recorded a decline in the period.
VAT remittance by the transport and haulage services sector grew significantly by 78.8% to stand at ₦43.5 billion, closely followed by the Agricultural and plantation sector with a 65.4% increase to stand at ₦4.34 billion.
Despite the economic downturn experienced by the country due to the lockdown measures put in place by the government in response to the Covid-19 pandemic and decline in global oil prices, VAT revenue increased significantly in the year. A development, which is largely attributable to the increase in VAT rate from 5% to 7.5% under the Finance Act implemented in February 2020.
Biggest tax paying sectors
In 2019, other manufacturing sector topped the lists of sectors with the highest VAT remittances, with a total of ₦124.14 billion in VAT. However, professional services took over in 2020 with a 44.8% increase to stand top with a total VAT remittance of ₦162.32 billion.
Meanwhile, other manufacturing followed with ₦154.2 billion, Commercial and trading with ₦77.4 billion, Breweries, bottling, and beverages at ₦59.7 billion, while State ministries and parastatals remitted a total of ₦59 billion in value-added taxes.
Other sectors that made up Nigeria’s top 10 biggest VAT sources during the period include, transport and haulage services (₦43.5 billion), oil-producing (N43.4 billion), Federal ministries and parastatals (₦26.3 billion), Banks and financial institutions (₦24.8 billion), and finally a sector not classified with N22.9 billion remittance.
On the flip side, mining generated the lowest VAT with N250.9 million remittance, followed by the textile and garment industry (₦1.19 billion), pharmaceutical, soaps and toiletries (₦1.4 billion), local government councils (₦1.9 million), and publishing, printing, paper packaging (₦2.08 billion).
The truth of the matter
Increasing the VAT by 2.2% has lead to an increase in the cost of production and provision of goods and services, especially for those involved in ventures that require multiple stages of production. This has been associated to the cost encountered in which VAT has been charged, at multiple stages of their production process.
Consumers typically now pay more for goods of the same value before the 2.2% increase in VAT. While the VAT theoretically spreads the burden of tax on the added value of a good as it moves through the supply chain, from raw material to final product, the reality is that these increased costs are typically passed along to the consumer.