Federal Government Exempts Sanitary Pads, 19 Other Staples From VAT Hike

Come Feburary 1 2020, the new valued added tax (VAT) increase proposed by the The Federal Government will take effect. President Muhammadu Buhari a couple of weeks ago signed the Finance Act to increase the government’s revenue base, this translates to a 2.5 percent increment on purchases and transactions but in its bid to end period poverty, the government has exempted sanitary pads and 19 other staples from the hike.

The new law, according to the government will promote fiscal equity and support Micro, Small and Medium Enterprises (MSMES). A statement issued by the Senior Special Assistant on Media and Publicity to the Vice President, Laolu Akande, said the VAT increase would not lead to a rising cost of living for Nigerians.

To allay fears that low-income persons and companies will be marginalized by the new law, reduce the burden of taxation on vulnerable segments, and promote equitable taxation, the Finance Act 2019 has extended the list of goods and services exempted from VAT.

The additional exemptions include the following:

“Basic food items – Additives (honey), bread, cereals, cooking oils, culinary herbs, fish, flour and starch, fruits (fresh or dried), live or raw meat and poultry, milk, nuts, pulses, roots, salt, vegetables, water (natural water and table water) ” Locally manufactured sanitary towels, pads or tampons.

Services rendered by microfinance banks Tuition relating to the nursery, primary, secondary and tertiary education are also exempted.

“The increased new VAT rate of 7.5 percent is still the lowest in Africa, and one of the lowest anywhere in the world.

(South Africa VAT: 15 percent; Ghana: 12.5 percent; Kenya: 16 percent; Egypt: 14 percent; Rwanda: 18 percent and Senegal: 18 percent)

“Under Nigeria’s revenue sharing formula, 85 percent of collected VAT goes to States and Local Governments.

This means that the bulk of additional VAT revenues accruing from the increase will go towards enabling States and Local Governments to meet their obligations to citizens, including the new minimum wage as already noted by State Governors.

Before now, the Buhari administration had firmly resisted previous suggestions to raise VAT.” “The new Finance Act exempts Businesses with turnover below 25 million from VAT payments.”