Nigerians applauded a historical feat achieved by the apex tax collecting agency of the federal government of Nigeria when it boasted of its highest collection amounting to N5.3 trillion last week. While VAT charges constitute a significant portion of revenue generated in the country, a perusal of major contributors to this income boost revealed that the other manufacturing sector, professional services sector and the commerce and trade sector emerged the top three sectors that contributed the highest to Value Added Tax respectively.
Other manufacturing generated the highest amount of VAT with N31.48 billion generated in the third quarter of 2018. It was closely followed by professional services and commercial and trading both generating N25.57 billion and N15.99 billion respectively in the same period while mining generated the least and closely followed by pharmaceutical, soaps & toiletries and Textile and Automobiles & Assemblies with N52.70 million, N177.34 million and N265.35 million generated respectively, also in the same period.
Sectoral distribution of Value Added Tax (VAT) data for Q2 and Q3 2018 reflected that the sum of N273.50 billion was generated as VAT in Q3 2018 as against N266.73 billion generated in Q2 2018 and N269.79 billion in Q1 2018 representing 2.54 percent increase Quarter-on-Quarter and 9.16 percent increase Year-on-Year.
Out of the total amounted generated in Q3 2018, N128.62bn was generated as Non-Import VAT locally while N58.84 billion was generated as Non-Import VAT for foreign. The balance of N86.04 billion was generated as NCS-Import VAT
According to data provided by the Federal Inland Revenue Service (FIRS) and verified and validated by the National Bureau of Statistics (NBS), a collation of VAT generated from the 2018 first quarter to 2018 third quarter, showed that businesses classified under the other manufacturing sector of the economy generated N93 billion in Non-import local VAT charges, representing 24 percent of total VAT of N379.2 billion collected in that category for the same period.
Professional service providers accounted for N61 billion or 16 percent of non-import local VAT charges generated from Q1-Q3 2018 while commercial and trading activities accounted for N46 billion or 12 percent of non-import local VAT charges.
Babatunde Fowler the executive chairman of the Federal Inland Revenue Service (FIRS) recently hinted that growth in VAT collection hit 31 percent in 2018. Although the statistics are yet to be released publicly, Fowler noted that the ascension in VAT collection is due to an automated system of tax collection facilitated by collaborating with the banking institutions. He noted that the automation has also helped to reduce the cost of collections thereby boosting revenues.
“We are automating the collection of Value Added Tax, (VAT) in key sectors which will facilitate reduction in compliance cost in the long term. We are doing system to system integration between banks and FIRS. And I am happy to announce to you that we had a 31 percent increase year on year in VAT collection in the banks that have gone live between Jan 2017- Dec 2018 and collected 25 billion so far,” Fowler said.
Fowler also noted that among other initiatives to be rolled out by the revenue collecting agency in 2019, a Government Information Financial Management Information System (GIFMIS), which links FIRS to the Office of the Accountant General of the Federation OAGF for real-time exchange of information and data will better aid revenue generation.
We are also automating the payment of VAT by states through the State Offices of Accountant General Platform (SAG).
This will ensure that we automate and deduct at source and remittance of VAT and WHT from State governments’ contract payments directly to FIRS’s account and so far, collected 13 billion”.
With a profound advocacy for an increase in revenue generation to cushion burgeoning expenditure in Nigeria, VAT seen as the fastest growing tax type in the world looks like a glimmer of hope for Nigeria if well implemented, as Fowler pointed that “even rich countries like the United Arab Emirates, that did not depend on taxation have now introduced VAT.”
