Wednesday, 24 December 2014

FG to Generate N84.06bn from Luxury Tax Surcharge in 2015.

Finance Minister, Dr. Ngozi Okonjo-Iweala

As part of measures to shore up revenue in 2015 owing to dwindling oil revenue, the federal government looks to raise a total of N84.06 billion from luxury tax surcharges and savings from expenditure measures, analysis of Nigeria’s appropriation bill for 2015 laid before the national assembly has revealed.
The Coordinating Minister for the Economy and Minister for Finance (CME & MF), Dr. Ngozi Okonjo-Iweala had last week presented an aggregate expenditure proposal of N4.358 trillion for the fiscal year 2015 to the national assembly.
The proposal represents a decline of 6.1 per cent from the N4.542 trillion approved for 2014, increase of 7.6 per cent in recurrent expenditure and the oil price benchmark of $65 per barrel.
The budget highlighted a number of fiscal policy actions that would drive increased non-oil revenue in 2015 and support the possible gap a volatile oil price and production scenario could create.
These are categorised into two: the luxury tax surcharge and savings from expenditure measures. The a breakdown of the measures and the amount that are expected to be generated from them, showed that the federal government plans to raise N10.56 billion from luxury tax surcharges and N73.5 billion from savings from expenditure measures.
On the luxury tax surcharge side, new private jet import surcharge will generate N3.70 billion, luxury yacht surcharge N1.6 billion, luxury car import surcharge N2.60 billion, luxury surcharge on champagnes, wines and spirits N2.30 billion while the Federal Territory Tax (value of N300 million) was N306 million.
On savings from expenditure measures, curtailed procurement and upgrade of buildings will generate N44 billion, cut in international travels and training N14 billion, rationalisation of MDAs N6.5 billion, cut in procurement of administrative supplies and equipment N5 billion while cuts in other overhead measures will generate N4 billion.
Analysts at BGL Limited however believe the highlighted measures appear to be projected to generate a little too little compared to the size of the budget total.
“At N84.06 billion or about 2 per cent of the total budget, it would very little in the possible budget gap and financial risks that the government would face should oil price decline quickly further. In addition, most of these measures, according to the CME & MF, would not kick in until the second quarter of the 2015, probably the second half of the year. It therefore becomes clear that these measures may not only be inadequate; they may also be very weak in implementation.
“In addition, it appears that the low hanging fruits are not on the table at this time. This is the immediate commencement of rationalisation of the size of government (not the civil service). We are of the opinion that a quarter of the N1.81 trillion personnel costs in the 2015 budget could be saved through this channel, “they stated.


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