The Federal Inland Revenue Service (FIRS) yesterday explained that Value Added Tax (VAT) is a consumption tax primarily designed to support poor people, and not to create hardship for them.
The Chairman of FIRS, Babatunde Fowler allayed fears that the increase in VAT may cause hardship for the poor, stating that VAT is charged on consumption and capacity to consume. He said: “When you don’t consume certain categories of goods and services, you are not liable to pay VAT charges on those items.
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.
“VAT is not charged on 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.
Fowler said some people misunderstood what 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. “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 complete. Look at the Lagos-Ibadan expressway, look at the 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, according to a statement from FIRS.
Fowler said if countries such as United Arab Emirate (UAE), Saudi Arabia which are rich in oil resources would be laying emphasis on taxation, Nigeria should also emulate them.
The FIRS Chairman also explained that Nigeria’s economy is only picking up in recent times because former administrations over-looked tax reforms and depended on the depletable mineral resources.