Stakeholders in the nation’s capital market have kicked against the federal government recent directive to return value added tax (VAT) on all stock market transactions, saying it is capable of discouraging investors from participating in the market.
Stock broking firms operating at the NSE have been directed to charge VAT on all commissions applicable to market transactions effective from July 25, 2019.
In a notice to stockbroking firms by , Head, Broker-Dealer Regulation at the NSE, Olufemi Shobanjo recalled that its circular dated October 27, 2014, referenced BDR/CIR/GOI/10/14, on VAT exemption on commissions on stock transactions order. This was granted by then Coordinating Minister for the Economy and Minister of Finance, in 2014, as published in the Government’s Official Gazette No. 95, Vol. 101 issued on July 30, 2014.
Shobanjo said the order became effective on July 25, 2014, and valid for a five-year period, and will expire on 24 July 2019, following which dealing members, in the absence of a further extension, are to charge VAT effective July 25, on all commissions applicable to capital market transactions.
But stock brokers and analysts who commented on the issue condemned it on the ground that the stock market witnessed low patronage in the last five years even with exemption for VAT charges , noting that with the reintroduction of VAT the situation would worsen as more investors would loss interest in equity market.
They stated that with return of VAT investors’ appetite on stocks would further go down, leading to migration of investment to money market instruments.
Managing Director APT Securities and Funds Limited, Malam Garba Kurfi, said returning VAT charges into capital market would increase the transaction cost which is already high.
He said though the new directive would help to generate more revenue to the government but it would increase cost of transactions in the capital market and also discourages the foreign investors and institutional investors from participating in the nation capital market.
He said that low trading volume and value of transactions in the market has indicated that the economy is not doing well.
Also speaking, the Chief Research Officer, Investdata Consulting Limited, Mr Ambrose Omordion said the reintroduction of VAT charges on all capital market deals is obvious that government didn’t have much interest in the market.
He said that in the last five years, especially in 2015, 2016, 2018 and part of 2019 the market had suffered losses and there were no form of government policy or intervention to support the market that provides employment opportunities for Nigerians and drives economic growth.
