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Business News of Wednesday, 22 September 2021

Source: www.premiumtimesng.com

Despite controversies, FG targets N2.2trn from VAT in 2022

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The federal government is looking to get about N2.26 trillion from the Value Added Tax federation account in 2022.

It is also expecting another N10.5 trillion from the main federation account.

These are contained in the 2022-2024 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).

This is despite the clamour by some state governments to collect VAT in their states.

Some states in the South have been at loggerheads with the federal government over their bid to become the sole collectors of VAT in their domains.

Rivers and Lagos states have since signed into law bills authorising the state governments to collect VAT, a move being resisted by the Federal Inland Revenue Service (FIRS) while others are in the process of doing so.

Governors of the southern states under the aegis of Southern Governors Forum (SGF) in their recent meeting in Enugu, expressed support for the collection of VAT by state governments.

The governors affirmed the position that the collection of VAT fell within the powers of state governments.

There are, however, moves by the FIRS to legally empower the federal government to collect VAT across the country through an amendment to the Constitution.

READ ALSO: 400 persons benefit from free medical outreach in LagosFG’s planThe approval of the 2022-2024 MTEF was sequel to the consideration of the report of the Senate Joint Committee on Finance.

The MTEF shows that of the N2.26 trillion that the federal government is projected to receive in 2022, the states are expected to receive N1.13 billion, local governments N791.73 billion and federal government, N339.3 billion.

“Based on the key parameters driving the fiscal framework, the net amounts accruable to the Main Pool and VAT Pool Federation Account are projected at N10.52 trillion and N2.26 trillion respectively in 2022. The share of oil revenue is about 51.1% of total Federation Account receipts.

“Other components of the Federation Account revenues include revenues from Corporate Tax N1.87 trillion, Customs Revenue N1.72 trillion, Special Levies N148.40 billion, Solid Minerals N6.01 billion and Electronic Money Transfer Levy of N209.77 billion. The share of the Federal Government from the Main Federation Account Pool is N5.51 trillion while the States and Local governments are projected to get N2.80 trillion and N2.16 billion, respectively in 2022. From the VAT Pool, the Federal Government is projected to receive N339.31 billion, the States N1.13 trillion, and the local governments N791.73 billion,” chairman of the committee, Adeola Olamilekan, said in his presentation.

The VAT, he said, was estimated using projected aggregate nominal consumption, taking into account ‘vatable’ items and collection efficiency.

He explained that aggregate consumption is estimated at N149.35 trillion in 2022 from the revised N136.57 trillion estimated for 2021 (the initial estimate from NBS was 118.89 trillion).

“Like the CIT, more VAT payers are expected to be brought into the tax net with the effective implementation of the provisions of the Finance Act 2020 and improving collection efficiency. The VAT projections over the medium-term are based on holding the rate at 7.5 per cent. In the medium term, efforts to further improve the coverage and VAT collection efficiency will be accelerated.

“The aggregate revenue available to fund the 2022 Budget is projected at N7.26 trillion (nine per cent more than the 2021 budget). Of this, N3.16 trillion (49.1 per cent) is projected to come from oil related sources while the balance is to be earned from non-oil sources,” he said.

The lawmaker said in the medium term, GDP growth rate is projected to rise to 4.2 per cent in 2022 before moderating to 2.3 per cent in 2023 and picking up to 3.3 per cent in 2024.

Growth drivers, he said, are expected to remain telecommunications, agriculture, cement, and broadcasting and overall pre-election expenditure towards 2023 General Elections may also contribute to the growth-drive. Therefore, overall growth still likely to be muted in 2021.

PREMIUM TIMES reported how the Senate approved the MTEF pegging the crude oil benchmark price ar $57 per barrel and a total estimated expenditure of N13.98 trillion which includes the expenditures of N1.44 trillion for Government Owned Enterprises and donor funded projects amounting to N62.24 billion.

The lawmakers also approved N15.46 trillion and N16.77 trillion projected to be spent by the federal government in 2023 and 2024 respectively.

The exchange rate of N410/$ proposed by the executive was also approved.