Ahmed The Minister of Finance, Budget and National Planning, Zainab Ahmed, who announced the proposed increase after the Federal Executive Council (FEC) meeting on Wednesday said it was to shore up revenue for federal and state governments to meet their obligations.he organised labour and some trade unions in the country have rejected the increase in Value Added Tax (VAT) from 5 to 7.2 percent, even as experts expressed divergent views, Daily Trust reports. The increase will become effective from January if the National Assembly approves it, she said. VAT is a consumption tax placed on a product, and whenever value is added at each stage of the supply chain, from production to the point of sale, it could negatively affect the users who will be made to pay more for such products. The Nigeria Labour Congress (NLC), while rejecting the increase, said it would put more hardships on Nigerian workers. The NLC General Secretary Comrade, Emmanuel Ugboaja, told Daily Trust that “it (VAT hike) clearly seeks to erode whatever purchasing power the minimum wage may bring. “Labour sees it as a move not well thought through with the welfare of Nigerian wage earners in mind.” He noted that what the government needs to do is to widen the tax net and get people to pay tax and not to over tax those that are in the net as of now. Similarly, the Nigeria Employers’ Consultative Association (NECA) faulted the timing of the increment. NECA’s Director General, Mr Timothy Olawale, said the benefits of the recently signed National Minimum Wage of N30,000 would be neutralised by the proposed increase in the VAT. Olawale said the increment would further reduce the purchasing power of the citizens, lead to increase in prices of goods and services, raise inflation rate, and further contract the economy. Also, the Lagos Chamber of Commerce and Industry (LCCI) also described the VAT increase as an additional burden on investors. LCCI Director General, Dr. Muda Yusuf said: “The proposal to increase Value Added Tax (VAT) from 5% to 7.2% amounts to an additional burden on investors. Profit margins investments growth, consumer purchasing power and competitiveness of firms will be adversely impacted by this review. “ He said, as it is, businesses have been grappling with the challenges of multiple taxation, high import duty, high regulatory charges, exclusion from the official forex market and high energy cost. He said: “It is also disturbing that in Nigeria, VAT is not treated as consumption tax. Most often, VAT is imposed on the entire value chain of production and investment. Intermediate products are also often subjected to VAT. This is why investors would worry about the proposal to review the VAT. “We acknowledge that government is currently facing severe revenue challenges which have been impeding its capacity to provide basic services and infrastructure to the citizens. But it is important to realize that there is a relationship between investment growth, private sector development, economic performance and revenue performance of government. It is against this background that we urge the government to scale up its commitment to the creation of an enabling environment for investment in the country.” A financial expert and Managing Director of Cyber1 Systems Network International, Mr Momoh Aliyu, also faulted the increment in VAT, saying it could also cause a drastic reduction in consumption, thus reducing investments and business expansions. According to him, VAT is usually shared among three tiers of government, and” if the federal government is increasing it to pay salary, then, that would be unfortunate and inimical to economic growth. “VAT in general perspective in Nigeria is shared with four per cent net to FIRS, 50 per cent to states, 35 per cent to Local Governments and 15 per cent to the Federal Government. “With this development, only few states like Lagos, Kano, Rivers and FCT will have the impact positively, as they will have huge chunk of the money because they contribute 85 per cent of the VAT revenue in the country. “The question now becomes, what is the fate of the economic impact of other 32 states in Nigeria which, by virtue of increment of VAT, will be affected. “The solution to tax and VAT in Nigeria is tax netting. All the country needed to do is to create a better administrative know how that will increase tax netting. “We currently have serious problem with compliance at five per cent; what do you think will happen to an increment?” he asked. But a Yobe State based economist, Binta Yahaya, said the increase in VAT may be a welcome development in the future. “In my opinion time is not ripe to effect this increase because the economy is not favourable for many Nigerians to begin bearing the brunt. Many businesses are merely struggling to remain afloat. The increase could lead to the death of many businesses” she said. The economist who explained that VAT is tax imposed goods and services like food, phones, soaps, generators, cars or services like transportation, phone airtime, cinema shows, sewing of clothes amongst others. She explained that seller or service provider is required to charge VAT for the customer to pay and that the law mandates any person who is selling goods or rendering services to register with FIRS and charge VAT on their sales. Failure to register or charge VAT attracts fines. Also speaking, Mudashir Mustapha a financial analyst based in Lagos said VAT is a good avenue for generating high revenue for the government. He therefore called on FG to explore creative means of expanding the tax base and efficiently collecting and remitting tax to the appropriate channels. The Centre for Social Justice (CSJ) also welcomed the proposal for an increase in VAT. The Lead Director of the centre, Eze Onyekpere, said this will increase available resources for budget implementation and development across the three tiers of government. PDP faults Buhari on VAT The Peoples Democratic Party (PDP), while reacting, opposed President Muhammadu Buhari and his officials’ decision to increase VAT, saying Nigerians cannot bear such burden under the prevailing economic situation in the country. The PDP in a statement by its National Publicity Secretary, Kola Ologbondiyan, said the decision is anti-people, suppressive and further confirmed the Buhari Presidency as “extremely exploitative, inconsiderate and absolutely insensitive” to the suffering of Nigerians. The PDP insisted that the decision to increase VAT on already impoverished citizens was in bad faith and cannot be justified under any guise. The opposition party urged the National Assembly to protect Nigerians and save the nation from collapse by rejecting the decision.
