Some investors in the Nigerian capital market have called on the federal government to extend the exemption of Value Added Tax (VAT) charges on transactions on the Nigerian Stock Exchange (NSE) so as to attract more patronage to the market.
The federal government, had in 2014 exempted brokerage commission and transactionsfees charged by Securities and Exchange Commission(SEC), NSE and Central Securities Clearing System(CSCS) Plc from the five per cent VAT.
The then Coordinating Minister for the Economy and Minister of Finance, Dr.NgoziOkonjo-Iweala had announced the exemption as part of efforts to resuscitate the market. The exemption was for five years.
Following the expiration of the exemption, the NSE has notified stockbrokers that effective Thursday July 25, 2019 (tomorrow) the five per cent VAT would now be charged.
In a notification to stockbrokers, signed by Head, Broker/Dealer Regulation, NSE, Mr.Olufemi Shobanjo, said that exemption, which became effective on 25 July 2014 and valid for a period of five years, has expired July 24, 2019.
“To that extent, all dealing members of the NSE are to note that effective 25 July 2019, barring any further extensions from the federal government: VAT is to be charged on all commissions applicable to capital market transactions. These are commissions: earned by dealing members on traded values of shares; and payable to the NSE and CSCS.
The CSCS will automate the deduction of VAT charged on commissions payable to the NSE and the CSCS; and dealing members are required to resume the deduction of VAT on commissions earned. Consequently, dealing members are required to engage their software vendors for the automation of VAT deductions, and communicate to their clients the above ahead of the effective date. Furthermore, dealing members are reminded to ensure that the VAT charged on the commissions earned are remitted to the Federal Inland Revenue Service (FIRS) as and when due,” the notification said.
Speaking to THISDAY on the development, the National Chairman, Progressive Shareholders Association of Nigeria (PSAN), Mr. Boniface Okezie, said VAT charges should not be reintroduced into the market.
According to him, there are already many charges in the market that investors are contending with, saying that the resumption of VAT charges would discourage more investors from the market.
“In my humble opinion, the government should not allow VAT charges to return to the market. Shareholders are already paying withholding tax on their dividends. Before the declaring dividends, companies pay various taxes, which also reduce the dividend shareholders are getting. Now coming to ask them to pay VAT on transactions on the floor of the exchange, will amount to too much taxation and it will not encourage patronage of the market,” Okezie said.
Another investor, Mr. Moses Igbrude of Independent Shareholders Association of Nigeria(ISAN), said given the current state of the market, resuming VAT charges on the market would worsen the situation.
“At present the market is very volatile and the bears have remained in control since the beginning of the year. Many investors are not willing to come into the market and if VAT charges are reintroduced, it will further dampen investor confidence. I plead with capital market regulators to prevail on the federal government to extend the exemption so as to attract more investors to the market,” Igbrude said.
According to him, while there is no minister of finance now, the regulators should reach out to the Permanent Secretary, who is overseeing the ministry so that the exemption of VAT charges should be continued.
