The Executive Chairman, Federal Inland Revenue Service, FIRS, Mr Babatunde Fowler, has explained that Value Added Tax (VAT) is not meant to cause hardship but to support the poor.
Fowler gave the explanation in a statement issued on Tuesday by FIRS spokesman, Wahab Gbadamosi.
He was said to have given the clarification in Lagos at the maiden Nigeria Tax Outlook (NTO) Stakeholders Roundtable Series organised by Nigeria Taxpayer Hub.
His words: “I was at a programme at the Senate. I was talking about projection in 2019 for the VAT. And I was asked a question about what my personal views were about the VAT and some people got it a bit wrong. Let me clarify some things.
“I understand that some people misunderstand what the VAT is. VAT is a consumption tax. If you don’t have money to purchase certain categories of goods and services and you don’t consume them, then VAT is not your problem.
“The VAT is used to assist the needy. VAT provides support for the needy, not a hardship on them, 85 per cent of VAT collected is shared among states for them to provide free education, free health services, provide basic amenities among others.
“We can see what the Federal Government is doing with the tax money. Look at the rail system, the Abuja-Kaduna rail is completed.
“VAT contributed to Lagos-Ibadan expressway, education system, the school feeding programme among others. If at the state level, your government cannot justify the taxes you pay to them, you have the right to vote them out in the next four years,” Fowler said.
Stating that VAT was charged on consumption and capacity to consume, Fowler said those who did not consume certain categories of goods and services would not be liable to pay VAT charges on them.
“VAT is not charged on all medical and pharmaceutical products. It is not charged on basic food items. It is not charged on books and educational materials.
“It is not charged on baby products, fertilizers, locally produced agricultural and veterinary medicine. VAT is not charged on farming machinery and farming transportation equipment.
“Other products that have no VAT charges are all exports, plant machinery and goods imported for use in Export Processing Zones and free trade zone, provided that 100 per cent production of such company is for export.
“Other services exempted from VAT are medical services, services rendered by Community Banks, People’s Bank and Mortgage Institutions, plays and performances conducted by educational institutions as part of learning and all exported services are exempted from VAT,” he said.
He said the essence of VAT, was to provide basic amenities needed by the people.
According to him, if countries like United Arab Emirate, UAE, Saudi Arabia which were rich in oil resources would be laying emphasis on taxation, then Nigeria had no reason not to, especially, when the economy was just picking up.
He regretted that previous administration did not take advantage of VAT.
