Nigeria sees a vigorous increase in VAT Revenue which surges by 21% to N2.5 Trillion in 2022

By: Damian Okonkwo

Nigeria's Value Added Tax (VAT) revenue has risen by 21% to N2.5 trillion in 2022, according to the latest report released by the Federal Inland Revenue Service (FIRS). This increase in VAT collection is a positive development for the country's economy, as it indicates that businesses are expanding and consumers are spending more.

The report shows that the rise in VAT revenue was driven by an increase in the standard rate of VAT from 5% to 7.5% in February 2020. The increase in the VAT rate was a measure introduced by the government to boost its revenue base and reduce dependence on oil, which has been the main source of revenue for the country.

The FIRS attributed the growth in VAT revenue to improved tax administration, tax education, and the adoption of technology in tax collection. The agency also stated that it has intensified efforts to ensure compliance by businesses and individuals.

According to the report, the highest contributor to VAT revenue was the professional services sector, which accounted for 23% of the total VAT collection. The manufacturing sector and the commercial and trading sector followed closely with 19% and 16% respectively.

To further boost the income from VAT in the coming years, the FIRS revealed that it is working on a plan to expand the tax net to include more businesses and individuals who have previously not been captured in the tax system. This is part of efforts to increase the country's revenue base and reduce the dependence on oil.

The plan involves the use of technology to identify and track individuals and businesses that are eligible for tax payments but are not currently paying taxes. This is expected to boost the country's tax revenue and provide more resources for the government to fund critical infrastructure projects, healthcare, education, and social welfare programs.

Reacting to the news, tax experts have commended the government for its efforts in improving tax collection and administration in the country. They noted that the increase in VAT revenue would help to fund government projects and boost economic growth.

Overall, the rise in Nigeria's VAT revenue is a positive development for the country's economy, as it indicates that businesses are expanding, and consumers are spending more. The government must continue to implement policies and measures aimed at improving tax administration and compliance to sustain this growth.