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Tax › VAT & Company Income Tax Increment

 April 9th, 2016  | Tax

VAT & Company Income Tax Increment

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Analysts at FBN Quest, an investment and research firm,have explained why the monthly payout by the Federation Account Allocation Committee (FAAC) to the three tiers of government in March from February revenues declined to N345 billion.

A report by the firm said the decline from N370 billion the previous month was due to oil and gas pipeline vandalisation. It said the payout for last month fell below the projected pro rata monthly average of N477 billion.

The report titled: ‘Another low payout by FAAC’ released at the weekend, blamed the vandalisation at Escravos terminal and force majeure declared at Brass terminal, which led to the shutdown of pipelines at other terminals for repairs and maintenance for the revenue shortfall.

Other reasons adduced are the substantial drop in revenue from oil and gas royalty, companies’ income tax and import duty.

According to the 2016 to 2018 expenditure framework, the net distribution from the federation account and the Value Added Tax (VAT) pool combined is projected at N5.72 billion this year.

However, the Federal Ministry of Finance announced after the FAAC meeting that the balance in the excess crude account increased very marginally to $2.259 billion from $2.258 previously recorded.

The crude oil price averaged $34.2/barrel in February, compared with $33.7/barrel the previous month.

“There are initiatives that are currently in the pipeline to boost non-oil revenue collection. Lagos, the model state, recently announced plans to extend its tax remittance to include domestic workers and artisans. The Lagos State Internal Revenue Service is currently working on how to engage the informal sector to ensure voluntary compliance,” it said.

Meanwhile, the International Monetary Fund (IMF) at the weekend cut its growth forecast for Nigeria as the economy faces “substantial challenges” from low crude prices.

In its yearly review of Nigeria’s economic situation by the Executive Board of the International Monetary Fund (IMF), concluded the Article IV Consultation with Nigeria, the Fund said gross domestic product growth would slow to 2.3 per cent in 2016 from an estimated 2.7 per cent in 2015. In February, after IMF officials visited the country, the Fund had forecast 3.2 per cent growth for Nigeria in 2016.

They urged a gradual increase in the Value Added Tax (VAT) rate, further improvements in revenue administration, and a broadening of the tax base.

Discussions between Nigeria and the World Bank are continuing on a possible loan or credit facility that is tied to policy reforms in the West African oil exporter, a spokesman for the Washington-based multilateral lender said.

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