If you are the type that relishes luxury items, then be ready to pay more as the federal government has announced plans to increase tax on luxury items like champagne as disclosed by the Minister of Finance, Kemi Adeosun, after the Federal Executive Council meeting on Wednesday.
In 1994, the military government introduced value added tax (VAT) of 5% which is the lowest in the world. “What the (review) committee report has shown is that we should look at actually increasing VAT on some luxury items. At 5% we have lowest VAT,” Adeosun said.
“And while we don’t think VAT should be increased on basic items, if you are going to drink champagne, for instance… in the UK if you drink champagne the VAT is 20%, so why should it be 5% in Nigeria.
“So they have made recommendations that we should pull out some luxury items and increase VAT on those items immediately. And I think that is a very valid and sensible suggestion which we are going to take to the national assembly to see how we can implement it.
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. It had estimated to generate about N480bn from taxes on luxury items in the 2015 fiscal period.
“But as far as basic goods are concerned, no there will be no tax increase. I believe it is only fair that when you consume luxury goods you should pay a little bit more. The National Assembly will decide the percentage,” she added.
Adeosun further explained that this will address the low tax-to-GDP ratio which is at 6%.
