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REAL ESTATE SECTOR: N70BN VAT CONTRIBUTION IN 5 YEARS

The Value Added Tax (VAT) generated from the construction and real estate sector experienced remarkable growth, surging by 124 percent from N10 billion in 2018 to N22.45 billion in 2022. An analysis of the National Bureau of Statistics' quarterly VAT report revealed that the sector contributed a total of N70 billion to the overall VAT collection during this period.
 
VAT is a consumption tax paid by consumers when purchasing goods and services, and it is charged at a rate of 7.5 percent. The revenue generated from VAT is distributed to the three tiers of government through the Federation Accounts Allocation Committee. The construction and real estate sector's VAT contributions were recorded at N10 billion in 2018 and N10.17 billion in 2019. Subsequently, it rose to N11.38 billion in 2020, N15.89 billion in 2021, and finally, an impressive N22.45 billion in 2022.
 
The surge in Nigeria's VAT revenue can be attributed to the increase in the VAT rate from 5 percent to 7.5 percent in 2020, resulting in a doubling of VAT collection. The country achieved a record high VAT revenue of N2.51 trillion in 2022.
 
 
Despite the growth in VAT revenues, there are discussions about further increasing the VAT rate. The former Minister of Finance, Zainab Ahmed, advocated raising the VAT rate from 7.5 percent to 10 percent under the incoming government. However, there have been concerns expressed by business leaders about additional tax burdens, particularly considering the challenges businesses are already facing.
 
Muda Yusuf, the Director of the Centre for the Promotion of Private Enterprise, suggested a careful review of VAT to avoid overburdening businesses. He emphasized the importance of broadening the tax net by bringing more people into the tax system, rather than increasing the burden on existing taxpayers.
 
Johnson Chukwu, the Chief Executive Officer of Cowry Assets, highlighted the need for a good tax system characterized by ease of collection, low cost, and convenience of payment.
 
 
In conclusion, the construction and real estate sector's contribution to VAT revenue has witnessed significant growth, reflecting the sector's vital role in Nigeria's economy. As debates about VAT rate adjustments continue, striking a balance between revenue generation and supporting businesses' growth remains essential for sustainable economic development.

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