Abuja eyes electronic money transfer tax to bring in N29.3b
By Jeph Ajobaju, Chief Copy Editor
Value Added Tax (VAT) alone is expected to fetch N316 billion for the treasury next year, a rise of 99.2 per cent, with Abuja ramping up consumption tax expansion, which will make citizens poorer but raise funds for the 2022 budget.
Tax on electronic money transfers is estimated to raise N29.3 billion as part of new non-oil revenue intakes to shore up federal income amid unstable oil export earnings that have been the backbone of the economy for decades.
However, Rivers and Lagos are in a legal tussle with the Federal Inland Revenue Service (FIRS) over VAT collection which is not on the Exclusive List in the Constitution and, therefore, belongs to states.
Rivers won the case at the Port Harcourt Federal High Court in August. The FIRS appealed to the Federal Appeal Court, where Lagos joined Rivers in the suit in September. The case is expected to go up to the Supreme Court.
Five Northern states – Adamawa, Plateau, Kaduna, Kogi, and Zamfara – plan to join the federal government against Rivers and Lagos.
If the FIRS loses at the Supreme Court, then its plan for VAT will be scuttled.
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Abuja generated N1.15 trillion as non-oil revenue between January and August, 15.7 per cent above N992.62 billion prorated target driven by VAT.
But total revenue stood at N3.93 trillion, 27 per cent short of target, according to data Finance Minister Zainab Ahmed presented on the 2022 budget proposal and 2021 budget implementation.
VAT collection was N235.77 billion, which is N76.8 billion higher than N158.95 billion prorated revenue target up to August.
The federal government budgeted N238.43 billion as VAT revenue for the 2021 fiscal year, however, 98.9 per cent was collected in eight months.
Funding N16.39 trillion 2022 budget
Plans for the new VAT drive are in the 2022 Appropriation Bill which President Muhammadu Buhari presented to the National Assembly (NASS) on October 7.
In the bill, total expenditure is estimated at N16.39 trillion with crude oil price benchmarked at $57 per barrel (pb) and oil output 1.88 million barrels per day (mbpd) – including condensates of between 300,000 and 400,000 bpd.
Naira exchange rate is projected at N410.15 per dollar and Gross Domestic Product (GDP) growth rate at 4.2 per cent with 13 per cent inflation rate.
Revenue is estimated at N12.72 trillion with N10.13 trillion available to fund the budget.
Vanguard reports that the 2022 VAT target is 99.2 per cent higher than N158.95 billion in 2021, which is 3.12 per cent of N10.13 trillion revenue.
Abuja introduced in 2020 various consumption taxes and raised VAT to 7.5 per cent from 5 per cent to raise revenue against falling oil prices.
Apart from expected rise in VAT revenue in 2022, the government also targets increases in non-oil revenue, such as Company Income Tax (CIT), Customs revenue and Federation Account levies.
All are expected to lift non-oil revenue 59.3 per cent to N2.132 trillion in 2022 against N992.63 trillion in 2021.
Revenue subhead targets
Among other subheads, Abuja seeks to raise
- N909.30 billion – CIT, 100.07 per cent above N454.48 billion (2021).
- N834.12 billion – Customs, 146.2 per cent higher than N338.85 billion (2021).
- N71.97 billion – Federation Account levies, 78.41 per cent above N40.34 billion (2021).
By August, revenue yields were as follows:
- Oil revenue – N754.2 billion, 56.3 per cent of N1.34 trillion target.
- Non-oil revenue – N1.15 trillion, 15.7 per cent above target.
- CIT – N547.54 billion, 20.5 per cent above target.
- VAT – N235.77 billion, 48.3 per cent above target.
- Customs – N338.85 billion, 0.1 per cent below target.
- Federation Account levies – N40.34 billion, 34.6 per cent below target.