The Presidential Fiscal Policy and Tax Reforms Committee’s proposal is to reduce the VAT rate to zero per cent (0%) on food, health, education, and exemption for rent, transportation, and small businesses. Data by the NBS shows that these are the areas where the average household spends almost all their income, meaning their VAT burden will reduce.
The upward rate adjustment is on non essential items to partly offset the impact of the reduction in rate and exemption for essential items ensuring that the masses are protected, and providing some cushion for states who earn 85% of VAT revenue.
Businesses will also get full credit for the VAT they pay on their assets and services, thereby lowering their overall costs and moderating inflation.
See further breakdown of the proposals in the above table.
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