FG to raise VAT on luxury goods, including Champagne, others

The Federal Government on Wednesday unveiled a revised National Tax Policy which is meant to provide for an efficient tax system and address the low tax-to-GDP ratio.

Addressing the media on the revised tax system after the conclusion of the Federal Executive Council meeting on Wednesday, the Minister of Finance, Kemi Adeosun, said that the cabinet, which was presided over by the Vice President, Yemi Osinbajo has approved the revised National Tax Policy which will see the Value Added Tax (VAT) on luxury items, like champagne, among others raised from the current 5%.

The former administration of President Goodluck Jonathan had in 2014 put together austerity measures which were never implemented but was meant to boost government coffers. Those measures included tax on luxury goods, like Champagne, alcoholic beverages, private jets, luxury cars based on engine capacity, and yachts.

The scheme was estimated to generate about N480bn in the 2015 fiscal period.

The finance minister said that the revised tax policy would go into effect immediately, while some aspects that require legislative approval would be sent to the National Assembly for action.

Adeosun noted that Nigeria was one of the countries with the lowest Gross Domestic Product tax ratio in the world, adding that poor tax collection could be blamed for the nation’s current woes. So there was a need for a revised policy.

She said that as part of the implementation of the new tax policy, the Federal Government would try to reduce the number of taxes with emphasis on indirect taxes, as well as centralizing tax administration where possible.

What the committee has shown is that we should look at actually increasing VAT on some luxury items. With VAT of 5%, we have the lowest VAT. While we don’t think VAT should be increased on basic items, if you are going to drink champagne in the United Kingdom, the VAT is 20%; so, why should it be 5% in Nigeria?

So, they have made recommendations that we should pull out some luxury items and increase VAT on those items immediately. And I think that is a very valid and sensible suggestion, which we are going to talk to the National Assembly about to see how we can implement it.

“But as far as basic goods are concerned, no. I believe it is only fair that when you consume luxury goods, you should pay a little bit more. The National Assembly will decide the percentage,” the minister said.

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