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FG to Raise VAT on Champagne, Other Luxury Items

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  • FG to Raise VAT on Champagne, Other Luxury Items

The Federal Executive Council on Wednesday approved the revised National Tax Policy.

The policy will see the Value Added Tax on luxury items, like champagne, increasing from the current five per cent, among other changes.

The Minister of Finance, Mrs. Kemi Adeosun, disclosed this to State House correspondents at the end of a meeting of the council presided over by Acting President Yemi Osinbajo.

She was joined at the press conference by the Minister of Information and Culture, Alhaji Lai Mohammed; and the Minister of State, Aviation, Hadi Sirika.

The administration of former President Goodluck Jonathan had in 2014, while unveiling its austerity measures, identified some items that were to be taxed as luxury goods to include champagne, alcoholic beverages, private jets, luxury cars based on engine capacity, and yachts.

It had estimated to generate about N480bn from taxes on luxury items in the 2015 fiscal period.

Adeosun said while the implementation of the revised policy would take immediate effect, some aspects that required changes in law would be referred to the National Assembly for action.

She said Nigeria was one of the countries with the lowest Gross Domestic Product tax ratio in the world, adding that non-payment of tax was one of the biggest factors that contributed to the nation’s current economic situation, hence the need for the revised policy.

In implementing the new policy, the minister said the government would attempt to reduce the number of taxes with emphasis on indirect taxes, as well as centralising tax administration where possible.

Adeosun said, “What the committee has shown is that we should look at actually increasing VAT on some luxury items. With VAT of five per cent, we have the lowest VAT. While we don’t think VAT should be increased on basic items, if you are going to drink champagne in the United Kingdom, the VAT is 20 per cent; so, why should it be five per cent in Nigeria?

“So, they have made recommendations that we should pull out some luxury items and increase VAT on those items immediately. And I think that is a very valid and sensible suggestion, which we are going to talk to the National Assembly about to see how we can implement it.

“But as far as basic goods are concerned, no. I believe it is only fair that when you consume luxury goods, you should pay a little bit more. The National Assembly will decide the percentage.”

The minister said the objectives of the revised policy included to guide the operation and review of the tax system; provide the basis for future tax legislation and administration; provide clarity on the roles and responsibilities of stakeholders; and standard benchmark on which they would be held accountable.

In implementing the policy, Adeosun stated that an office of tax simplification would be established; a tax policy implementation committee would be set up; only one revenue agency per level of government would be allowed; the Independent National Electoral Commission to mandate political parties to articulate their tax agenda during election campaigns; and the establishment of administrative framework for amnesty and whistle-blowing, among others.

Others are to develop Key Performance Indicators for Nigeria to attain a top 50 on ease of paying taxes by 2020; creation of a dedicated tax policy website; setting aside a uniform day in the year as a National Tax Day; as well as the promulgation of an Act to establish the Joint Tax Board’s mandate beyond its current advisory role.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Guinness Nigeria Postpones Spirits Importation Exit, Extends Deal with Diageo

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Guinness Nigeria Plc has announced a delay in its plan to halt the importation of spirits as it extended its agreement with multinational alcoholic beverage company Diageo until 2025.

The decision, communicated through a corporate notice filed with the Nigerian Exchange Limited on Tuesday, cited a longer-than-expected transition period for separating its business from Diageo’s.

Initially slated for discontinuation in April 2024, the importation of premium spirits like Johnnie Walker, Singleton, Baileys, and others under the 2016 sale and distribution agreement with Diageo will now continue for an additional year.

The extension comes as the process of business separation between Guinness Nigeria, a subsidiary of Diageo, and Diageo itself faces unexpected delays.

In October, Guinness Nigeria had announced plans to cease importing spirits from Diageo, a move aimed at reducing its foreign exchange requirements.

However, the separation process has encountered unforeseen hurdles, necessitating the extension of the importation agreement.

The notice, signed by the company’s Legal Director/Company Secretary, Abidemi Ademola, highlighted the ongoing efforts by Guinness Nigeria and Diageo to implement the separation, originally scheduled for completion by April 2024.

The extension underscores the complexity of disentangling the businesses and ensuring a smooth transition.

Guinness Nigeria reaffirmed its commitment to the long-term growth strategy, aligning with Diageo’s decision to establish a new, wholly-owned spirits-focused business.

Despite the delay, both companies remain dedicated to managing the importation and distribution of international premium spirits in West and Central Africa, with Nigeria as a key hub.

The postponement comes amid challenges faced by Guinness Nigeria, including significant exchange rate losses, which amounted to N49 billion in the 2023 half-year operations.

Despite these setbacks, the company remains optimistic about its future prospects in the Nigerian market.

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Private Sector Warns: Interest Rate Hike to Trigger Job Cuts and Inflation Surge

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As the Central Bank of Nigeria (CBN) announced a hike in the Monetary Policy Rate (MPR) from 22.75% to 24.75%, concerns have been raised by the private sector regarding the potential ramifications on job stability and inflationary pressures.

The move, aimed at curbing inflation and stabilizing the exchange rate, has prompted apprehension among business operators who fear adverse effects on the economy.

Representatives from the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and the Nigerian Association of Small Scale Industrialists have voiced their worries over the increased difficulty in accessing affordable credit.

They argue that the higher interest rates will impede the private sector’s ability to borrow funds for expansion and operational activities.

This, they fear, could lead to a reduction in business investments and subsequently result in widespread job cuts across various sectors.

The Lagos Chamber of Commerce and Industry (LCCI) acknowledged the necessity of the interest rate hike but emphasized the potential negative consequences it may bring.

While describing it as a “price businesses would have to pay,” the LCCI highlighted the current fragility of the economy, exacerbated by various policy missteps.

They cautioned that the increased cost of borrowing could stifle entrepreneurial activities and discourage expansion plans critical for economic growth and job creation.

Experts have echoed these concerns, warning that the tightening monetary conditions could exacerbate inflationary pressures and hinder economic recovery efforts.

With inflation already soaring at 31.70%, the rate hike could further fuel price hikes, especially in essential goods and services, thus eroding the purchasing power of consumers.

However, CBN Governor Yemi Cardoso defended the decision, citing the imperative to address current inflationary pressures and ensure sustained exchange rate stability.

He emphasized the need to restore the purchasing power of ordinary Nigerians and expressed confidence that the economy would stabilize by the end of the year.

Despite assurances from the CBN, stakeholders remain cautious, calling for a more nuanced approach that balances the need for price stability with the imperative of fostering economic growth and job creation.

As businesses brace for the impact of the interest rate hike, all eyes are on the evolving economic landscape and the measures taken to mitigate its effects on livelihoods and inflation.

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Breaking Barriers: Transcorp Hotels CEO Shares Journey from Crisis to Success

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Dupe Olusola

Dupe Olusola, the Managing Director/CEO of Transcorp Hotels Plc, reflects on her remarkable journey from navigating the depths of a global pandemic to achieving unprecedented success in the hospitality industry.

Appointed in March 2020, amidst the onset of the COVID-19 pandemic, Olusola found herself at the helm of a company grappling with the severe economic fallout and operational challenges inflicted by the crisis.

Faced with a drop in occupancy rates from 70% to a mere 5%, Olusola and her team were confronted with the daunting task of steering Transcorp Hotels through uncharted waters.

Undeterred by the adversity, they embarked on a journey of transformation, leveraging creativity and resilience to navigate the turbulent landscape.

Implementing innovative strategies such as introducing drive-through cinemas, setting up on-site COVID-19 testing facilities, and enhancing take-away services, Transcorp Hotels adapted to meet the evolving needs of its guests and ensure continuity amidst the crisis.

Embracing disruption as a catalyst for growth, Olusola fostered a culture of collaboration and teamwork, rallying her colleagues to overcome obstacles and embrace change.

Through unwavering determination and a commitment to excellence, Transcorp Hotels emerged from the pandemic stronger than ever, breaking profit and revenue records year after year.

“It’s indeed been a great opportunity to learn and relearn, to lead and to grow. When you see success stories, remember it’s a journey with twists, turns, ups and downs but in the end, it will all be okay”, she said.

Olusola’s leadership exemplifies the power of adaptability and perseverance, inspiring her team to transcend limitations and chart a course towards unprecedented success.

As Transcorp Hotels continues to flourish under her stewardship, Olusola remains steadfast in her dedication to driving innovation, fostering growth, and breaking barriers in the hospitality industry.

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