The Federal Executive Council on Wednesday approved 7.2 per cent as new Value Added Tax rate for the country, up from the current 5 per cent.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, who spoke with State House Correspondents after the FEC meeting in Abuja, said consultations were ongoing over when the new rate would apply.
She said, “We also reported to council and council has agreed that we start the process toward the increase of the VAT rate from 5 per cent to 7.2 per cent”.
Read also: VALUE ADDED TAX INCREASE: IMPACT ON MINIMUM WAGE
Mrs Ahmed gave an increase in revenue accruable to state governments as one of the reasons for the increase.
“This is important because the Federal Government only retains 15 per cent of the VAT; 85 per cent is actually for the states and local governments. The states need additional revenue to be able to meet the obligations of the minimum wage”.
The minister, however, said the implementation will not be immediate as there was the need to amend the current law.