VAT revenue rises 35% YoY
By Jeph Ajobaju, Chief Copy Editor
Value Added Tax (VAT) collection rose 35.4 per cent year-on-year (YoY) from N1.5 trillion in 2020 to N2.1 trillion in 2021, despite the dispute over the consumption tax in which Lagos joined Rivers in the Appeal Court.
Rivers won the argument in August 2021 at the Federal High Court in Port Harcourt which ruled that only states have the constitutional right to collect VAT and should not be collected by the Federal Inland Revenue Service (FIRS).
The FIRS appealed to the Appeal Court in Abuja, where Lagos joined Rivers as a co-defendant. Rivers later raised the stakes by going to the Supreme Court even with the Appeal Court not having taken a decision on the case yet.
The Supreme Court has also not ruled on the case.
However, the Senate has voted against the request by the FIRS for VAT to be put on the exclusive legislative list.
National Bureau of Statistics (NBS) data on VAT revenue shows that N563.7 billion was collected in the fourth quarter of the year ended December 2021 (Q4 2021).
This is a 12.6 per cent YoY growth on N500.5 billion in Q3 2020 and 24.0 per cent on N454.7 billion in Q4 2020.
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VAT trajectory post pandemic
Quarter on Quarter (QoQ) VAT on locally produced goods (non-import) rose 12.8 per cent in Q4 2021, Nigerian Customs Service (NCS)-Import 2.5 per cent and non-import (foreign) 27.4 per cent.
Nairametrics reports that the growth in VAT on locally produced goods (+12.8 per cent QoQ and +56.8 per cent YoY) reflects continued recovery in consumption, post the pandemic peak in 2020.
The impact of persistent inflationary pressures on prices of goods and services also aided the growth as VAT is charged on the value of transactions.
Save for the decline in the Arts, Entertainment & Recreation and Education, all other sectors drove the QoQ growth.
VAT was hiked to 7.5 per cent in February 2020, leaving only one month of lower rate. Excluding any growth attributable to currency adjustments, a huge part of the growth is largely due to improving macroeconomic conditions.
VAT revenue may continue to benefit from quick recovery in consumer spending post pandemic.
