The Federal Executive Council on Wednesday approved the revised National Tax Policy which will effect an increase of taxes incurred by luxury products such as champagne, private jets, and yachts, from the current 5% paid.
Speaking with media correspondents after the end of the FEC meeting, the Minister of Finance, Mrs. Kemi Adeosun, joined by the Minister of Information and Culture, Alhaji Lai Mohammed; and the Minister of State, Aviation, Hadi Sirika, said the revised policy would take immediate effect, but some aspects that required changes in law would be referred to the National Assembly for action.
Adeosun also explained that non-payment of tax was one of the biggest factors that contributed to the nation’s current economic situation, hence the need for the revised policy.
The administration of former President Goodluck Jonathan had in 2014, while unveiling its austerity measures, identified some items that were to be taxed as luxury goods to include champagne, alcoholic beverages, private jets, luxury cars based on engine capacity, and yachts.
The former PDP-led administration had estimated to generate about N480bn from taxes on luxury items in the 2015 fiscal period.
In implementing the new policy, the minister said the government would attempt to reduce the number of taxes with emphasis on indirect taxes, as well as centralising tax administration where possible.
Adeosun said, “What the committee has shown is that we should look at actually increasing VAT on some luxury items. With VAT of five per cent, we have the lowest VAT. While we don’t think VAT should be increased on basic items, if you are going to drink champagne in the United Kingdom, the VAT is 20 per cent; so, why should it be five per cent in Nigeria?
“So, they have made recommendations that we should pull out some luxury items and increase VAT on those items immediately. And I think that is a very valid and sensible suggestion, which we are going to talk to the National Assembly about to see how we can implement it.
“But as far as basic goods are concerned, no. I believe it is only fair that when you consume luxury goods, you should pay a little bit more. The National Assembly will decide the percentage.”
Adeosun further stated that an office of tax simplification would be established; a tax policy implementation committee would be set up; only one revenue agency per level of government would be allowed and the Independent National Electoral Commission to mandate political parties to articulate their tax agenda during election campaigns.
The FEC meeting held before the press conference was presided over by Acting President, Prof. Yemi Osinbajo.