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Business News of Friday, 17 January 2020

Source: www.mynigeria.com

MAN faults VAT hike, applauds Financial Bill

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With the 2019 Financial Bill signed into law by the President, Major General Muhammadu Buhari (retd.), the Manufacturers Association of Nigeria, MAN, has faulted the 50 percent increase in the Value Added Tax (VAT) rate.

Director General of MAN, Mr. Segun Ajayi-Kadir, who applauded the Financial Bill as a progressive decision, however, cited that the increase in VAT is a sore point.

He described the move as "an unexpected turn in the efforts of government to improve the competitiveness of the manufacturing sector and alleviation of diminishing standard of life of the average citizens”.

“This is more so with manufacturing companies, owing to the peculiarity of business operations in the sector where the basis of revenue recognition is different from when sales and payment is received on items of goods produced. There is usually a time lag between when customers make payments for sale orders and when the goods are made available to them. This means that there will be significant instances of undelivered sales at the prevailing VAT rate of 5% when the law was signed, and when the new VAT rate increase will take effect.

“We therefore feel that the sales order issued and paid prior to the effective date be invoiced at the current VAT rate of 5% even after the effective date, while sales orders issued after the effective date be invoiced at the new VAT rate.

“Also, special arrangement is required to assist businesses transit from the old rate to the new rate under different scenarios. Specifically, transitional guidelines for a smooth conversion from the current tax laws to the changes introduced in the new law are required,” he stated.