The Federal Government of Nigeria has finally released the Economic Recovery and Growth Plan, which raised the Value Added Tax rate on luxury items from the current five per cent to 15 per cent.
Through the increase in VAT rate on luxury items, which the document stated would commence in 2018, as well as improvement in Companies Income Tax, a total of N350bn is being projected to be generated annually.
The new plan comes after months of extensive consultation with stakeholders from both the private and public sectors of the economy.
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 President Muhammadu Buhari-led government said it would increase non-oil tax revenues by improving tax compliance and broadening the tax net by employing appropriate technology and tightening the tax code, as well as introducing tax on luxury items and other indirect taxes to capture a greater share of the non-formal economy.
It also announced plans to undertake major reforms in the budgeting for state-owned enterprises, which would include legislative amendments of the laws establishing many of the SOEs.
The government, according to the document, is targeting real Gross Domestic Product of N81.38tn by 2020.
The document, the content of which is expected to take the country out of recession, was released by the Ministry of Budget and National Planning and contains the economic blueprint of the government for the three-year period, 2017 to 2020.
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