The value added taxes in Nigeria were created as replacements or substitutions for the sales taxes that were in operation before. They were imposed on all goods that were manufactured in the country as well as goods that had been made outside the country and were selling there. As per the VAT Decree No. 102 made on the 24th of August, 1993 in Abuja by the President and Commander-in-Chief of Nigeria, General I. Babangida certain goods and services have been exempted from the purview of value added taxation. As per the specifications laid down in the above mentioned decree goods such as all exported goods, medical and pharmaceutical products, products meant for kids, basic food items, commercial vehicles and their spare parts, books and other educational materials, fertilizer, farming machines, agricultural products, farming transportation equipments and veterinary medicines and magazines and newspapers.
As per the above mentioned decree a number of services have been declared exempted from value added taxation in Nigeria. These services are all the services that are exported, medical services, plays and performances that are run by educational institutions for educational purposes and services that are provided by community banks, mortgage organizations and people's banks. In Nigeria the companies or business organizations that function on a no profit making basis are required to pay value added taxes.
The Nigerian Federal Government enacted the VAT Amendment Act in 2007. This act empowered the Federal Government to fix the rate of value added taxes to be imposed in Nigeria. The rate was increased to 10%. However, discussions regarding the possibility of a 50% reductions in the rate are on. In Nigeria value added taxes are also imposed on sale of land, as well as check transactions. The number of payments to be made is 12 and the amount of time is 160 hours.
The value added taxes are one of the major sources of financing in a number of economically developing countries across the world. The situation is similar in Nigeria as well. During 1994 the revenues earned from value added taxes in Nigeria exceeded the projections. They contributed 4% of the total revenue raised by the Federal Government in that year. In 1995 the rate of contribution was 5.39%. However, there have been some teething issues as far as value added taxes in Nigeria are concerned.
The members of the organized private sector in Nigeria have been voicing their reservations regarding the value added taxes that are taking a toll on the prices of their products as well as the operational prices of their products. The way the Nigerian Federal Government has looked after issues related to value added taxes in has attracted a certain degree of criticism. Their management of the expenditure of the revenues generated from the value added taxes has faced some flak as well. The fact that no research was conducted into the possible effects of the value added taxes before they were put to work has only compounded the problems. All in all the situation of the value added taxes in Nigeria is far from desirable.
The Brisbane G20 Summit offered civil society groups an opportunity to renew demands for a financial transaction tax (FTT). But in the end it proved a missed opportunity to build international cooperation on financial reform.
Nouriel Roubini, a.k.a. “Doctor Doom”, is chairman of Roubini Global Economics and professor of economics at New York University’s Stern School of Business. Roubini has been consistently cited as one of the world’s top global thinkers. This year, he was voted as the most influential economist in the world by Forbes magazine.
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James W. Harpel Professor of Capital Formation and Growth at the John F. Kennedy School of Government in Harvard University. Director of Program in International Finance and Macroeconomics at the National Bureau of Economic Research.