THE implementation of the new value-added tax rate (VAT) would take effect from February 1, giving Nigerians 16 days to prepare for the spike in the new tax rate of 7.5 percent.

According to the Finance Act, this VAT increase is meant to help the federal government achieve its revenue projections for the 2020 budget.

The focus is on finance key government projects, especially in the areas of health, education and critical infrastructure.

As indicated in the Finance Act another major objective is the supporting of micro, small and medium Enterprises (MSME) in line with the ease of doing business reforms such as the VAT threshold.

Mrs. Zainab Shamsuna Ahmed said, “The annual budget will always be accompanied by Finance Bills to enable the realizations of revenue projections”.

The finance minister also explained that the  Act would provide opportunities to strengthen the capital market and ultimately ensure sustained and inclusive growth and development.

The federal government thinks the small and medium businesses in Nigeria, which are the most vulnerable businesses, would be relieved of the heavy tax burden, and encourage more potential business owners.

Some of these measures include expanding the list of VAT-exempt items, for example, basic food items, educational materials, and medical supplies.

This act has reduced corporate tax rate for MSME from 30 percent to 20 percent for small firms (with a turnover of between N25million and N100 million per annum), and exempting micro-firms (with a turnover of less than N25million per annum) from payment of CIT which clearly encourages every potential business owner.