BUSINESS
Tax revenue: FG bemoans low VAT generation
As the Federal of Government continues to source for how to finance its budget deficit, minister for finance, Kemi Adeosun, on Tuesday lamented low contributions of most of the states to the nation’s Value Added Tax (VAT) revenue.
Speaking at the parley between the federal government and progressive governors forum (PGF) in Abuja on Tuesday, Adeosun, said that more than half of Nigeria’s VAT comes from Lagos state alone. She noted that 87 per cent of Nigeria’s VAT is derived from four states and the Federal Capital Territory (FCT).
In other words, only 13 per cent of Nigeria’s VAT comes from 32 other states in the federation. According to her no country in the world with high tax compliance rate is poor, and no rich country has a low tax compliance rate.
“There is no poor country that has a high tax compliance rate, and no rich country that has a low one,” Adeosun said. Meanwhile, there was a sigh of relief as Oil prices hit a two-month high yesterday lifted by a tightening US crude market and the threat of sanctions against OPEC-member Venezuela.
This was because 70 per cent of the largest economy in Africa comes from oil, which has been badly affected due to the global sharp drop in the oil prices. But on Tuesday, Brent crude futures were 52.90 dollars per barrel earlier in the day, their highest since May 25.
Prices have risen around 10 per cent since the last meeting of leading members by the Organisation of the Petroleum Exporting Countries (OPEC) and other major producers, including Russia. However, traders said the biggest price supporter was currently a tightening U.S oil market.
After rising by more than 10 per cent since mid-2016, U.S oil production dipped by 0.2 per cent to 9.41 million barrels per day (bpd) in the week to July 21. It is however, worthy of notes that about a third of Nigeria’s 2017 budget will be funded by borrowing from internal and external sources, an official has said.
The Minister of Budget and National Planning, Udoma Udoma, had said the government seeks to borrow about N2.32 trillion to finance the N7.29 trillion budget. “Of this amount, N1.067 trillion (46 per cent of this borrowing) is intended to be sourced externally, while N1.25 trillion will be sourced domestically,” he said.
About 67 per cent of the 2017 budget, will however be funded from government revenue, majorly from oil and non-oil sources. Mr. Udoma said at the public presentation of the details of the 2017 “Budget of Recovery and Growth” in Abuja that based on key assumptions and budgetary reform initiatives, government hopes to realize about N4.94 trillion as revenue during the year.
The revenue projection, which he said exceeded the 2016 figure by 28 per cent, would be realized from oil (about N1.985 trillion), non-oil (N1.373 trillion) and other revenues such as minerals and mining.
The revenue contribution from oil, the minister said, would be about 40.2 per cent, as a result of the cost reduction due to the new funding mechanism for the joint venture operations adopted last week, higher oil prices, exchange rate gain and additional oil related revenues, compared to 19 per cent in last year’s budget.
Details of other expected revenues to fund the budget, Mr. Udoma explained, include about N30 billion from federal government share of dividend payments from the Nigeria LNG; earnings from mineral and mining (N1 billion); company income tax (N808 billion), value added tax (N242 billion) and recoveries and fines (N565 billion).
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