Minister of Finance, Zainab Ahmed, has said that the new finance bill, which recommends a 50 per cent increase on Value Added Tax passed by the Senate will take effect from January 2, 2020.
Ahmed, according to PUNCH, made the disclosure at a PWC executive session on finance bill and tax strategy on Wednesday.
She explained that the intent of the new tax regime was not to hurt businesses but to grow the country’s non-oil sector contribution.
She said, “The Nigerian economy is characterised by structural challenges that limit the country’s ability to sustain economic growth, create more jobs and achieve significant poverty reduction.
“One of the biggest challenges of all is our high dependence on oil for our economic activities, fiscal revenues and foreign exchange earnings.
“In 2016, Nigeria fell into recession due to its vulnerability to oil.
"Although the oil and gas sector accounted for just about 10 per cent of the GDP, it represented 94 per cent of export earnings and 62 per cent of government revenues (federal and state) in 2011-2015.
“This narrative is changing but we still have much more to do to get to our desired revenue to GDP ratio of 15 per cent by 2023, which we anticipate to come from non-oil revenues.
"We must grow our tax to GDP ratio from the current six per cent as of 2018.”
The minister observed that the country is still short of the Sub-Saharan African average of 19 per cent.
Experts have argued that the country should have focused on increasing the tax net as the burden of paying more taxes will fall on a formal economy, which is segmented in few states like Lagos, Abuja and Rivers.
The government has however, placed some reliefs such as a zero increase on food items in the finance bill to mitigate against the shocks many Nigerians will feel on their disposable income.
The House of Representatives has so far held its assent to the bill.