Will the "change" era bring relief?
One polemic that has confronted companies engaged in the marketing and distribution of PMS, AGO, DPK and aviation fuel around VAT is whether or not VAT is/should be chargeable on these petroleum products
Today's reality is that despite an installed capacity of
445,000 b/d, Nigeria is struggling to achieve adequate and stable
supply of refined products. The nation's refineries have not at
any time aggregately operated at full capacity and have over the
years fallen into a state of disrepair due to neglect, irregular
and/or shabby turn around maintenance regimen. Reliance has been
placed on importation to make up the short-falls in daily supply of
refined petroleum products domestically.
Eleven (11) years ago, the Federal Government opted for full
deregulation in the downstream sector. This agenda was touted to be
motivated by three main objectives. First was the need to
re-appraise government involvement and participation in the
downstream sector. This was reflected in Government's desire to
reduce and e/or eliminate subsidies to the sector to enhance the
prospects cost reflective prices to emerge. Second was the need to
engage private capital in the ownership and operation of assets in
the sector. Third was the need to achieve security of supply
through free interplay of the forces of demand and supply.
It was then expected that market forces would have free rein in
determining the retail prices of petroleum products principally
kerosene (DPK), automotive gas oil (AGO/diesel), and premium motor
spirit (PMS/petrol) rather than for government to fix their retail
prices respectively. Eleven years on the reality is not different.
Indeed, the level of subsidies in the sector has horribly exceeded
the 2004 levels!
Nevertheless, the activities in the downstream sector are such that
the Federal Government should be able to assess and collect both
direct and indirect taxes. At the center of the collectible
indirect tax is value added tax (VAT). The VAT Act, Cap V1, Laws of
the Federation of Nigeria, 2007 (as amended) provides the legal
basis for the imposition of VAT on supply of all goods and services
in Nigeria except those specifically exempted.
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