The Federal Inland Revenue Service (FIRS) has said that a 7.5 percent value added tax (VAT) will be charged on radio and television masts, transmission lines, cell towers, mobile homes, caravans, and trailers, from September 1, 2023.
The revenue agency announced the development in a public notice released on Friday and signed by Muhammad Nami, its executive chairman. Nami explained that the items were previously excluded from building.
According to the FIRS, the provision allowing for the expansion of building is contained in the Finance Act 2023 which had a commencement date of May 1 but was later deferred to September 1.
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“The definition of “building” was amended in Section 46 of the VAT Act to exclude any fixture or structure that can be easily removed from the land,” the notice reads.
“As such, all the items removed from the definition of land have become chargeable to VAT. Companies letting, trading in or providing services with such items must charge VAT at the prevailing rate with effect from 1st of September, 2023.”
The tax agency further said that Section 14(3) of the VAT Act was amended to the effect that persons appointed to withhold or collect VAT shall remit the VAT withheld or collected on or before the 14th day of the month following the month in which the VAT was withheld or collected.
“Consequently, all VAT withheld or collected in August 2023 shall be remitted to FIRS on or before the 14th of September 2023,” the notice reads.
“Similarly, VAT withheld or collected in subsequent months shall be remitted to FIRS not later than the 14th day of the month following that in which the VAT was withheld or collected.”
It added that the rate of tertiary education tax (TET) was changed to three percent of assessable profits.
“The new TET rate of 3% shall take effect for TET becoming due in respect of the accounting period ending on or after 1st September, 2023,” the FIRS said.
On investment allowances and convertible currencies, the FIRS said sections 32, 34, and 37 of the Companies Income Tax Act (CITA) grant allowances in respect of capital expenditure incurred in certain circumstances, and tax exemption on income earned in convertible currencies from tourists by hotels have been repealed.
This, the agency said, means that the said allowances and tax exemption are no longer available for tax returns becoming due in respect of the accounting period ending on or after September 1, 2023.
However, the announcement has triggered a critical reaction from business leaders and analysts, who say that it is not time yet for the government to expand the tax net – considering Nigeria’s current poor economic situation.
There is concern that the move to include radio and television masts, transmission lines, cell towers, mobile homes, caravans, and trailers, in building will further squeeze the transport and telecom sectors.
Experts say that further increase in transportation costs will see the inflation rate, currently at 24.08%, accelerates – compounding the soaring cost of living.
Yemi Kale, Economist at KPMG Nigeria and former Chief of the National Bureau of Statistics (NBS), in June, warned the government about raising taxes on household expenditure and private business. He said such a move would impact the Nigerian business ecosystem negatively.
“In terms of public finance, I am one of the few people that do not believe in increasing taxes. I’m not one of the people that is a fan of pushing up taxes, particularly in a recession and when the economy is struggling with fragile growth,” he said.
President Bola Tinubu, though desperately seeking to increase the government’s revenue, acknowledged that heavy taxation in times of economic crisis is “counterproductive.”
He said: “During times of economic weaknesses, increasing taxation is counterproductive, high taxes invite possible economic contradiction and higher unemployment.”