No To Increase In VAT

The Federal Government recently spoke
about a 100 percent rise in the Value-
Added Tax (VAT) in Nigeria, ostensibly to raise more money for the administration. But organised labour, civil society groups and indeed, the general public are wondering whether government considers the possible effect it would have on the nation’s already prostrate economy.
Coming at a time President Muhammadu Buhari was apologising to Nigerians over the hardship they were currently experiencing, the proposed increase may become the last straw that would break the resilience of many persons.
Even before the visit to Nigeria in January, by the Managing Director of the International Monetary Fund (IMF), Ms. Christine Lagarde, during which she urged the Federal Government to consider a gradual increase in VAT, there had been a few futile moves to raise the consumption tax. But it was Vice President Yemi Osinbajo’s speech at a recent forum in Lagos that gave the latest indication of government’s plan.
The VP had described the current five percent VAT rate in Nigeria as rather too low and hinted that the Buhari administration would increase the tax this year.
According to reports, VAT was introduced in Nigeria in September 1993 following the recommendation of a study group constituted two years earlier to review the country’s tax system. But its implementation did not commence until January 1994 after the promulgation of the VAT Decree No. 102 of 1993.
Going by this decree, VAT was to have an introductory rate of five percent which would last for two years before any consideration of an upward review both in its rate and coverage. But Nigerians have continued to resist attempts to double the five percent rate 22 years after VAT was introduced.
Analysts have also suggested that Nigeria has one of the lowest consumption tax rates in Africa. They particularly cited Ghana where the rate is 15 percent; Cameroun 19.25 percent; South Africa 14 percent; Zambia 17.5 percent. Kenya 14 percent; and Egypt which charges 25 percent on luxury goods.
Increasing the VAT rate and the items on which it applied may not be a bad idea, after all. In fact, if the VAT rate is doubled and its total accruals shared among the tiers of government, the projection is that it would serve to relieve many cash-strapped States and local governments. However, The Tide thinks that the plan is ill-timed and dismissive of the 300 percent hike in the price of fuel, 150 percent rise in price of bread and 300 percent increase in prices of sachet water and other household items.
It should worry the Federal Government that banks have become most economically enslaving in our time, especially, going by the kind of absurd service charges and VAT they exact from the customers; that electricity tariff has gone too high and inflation is heading toward the austerity level.
The people are groaning under a terribly deflated Naira, ridiculously low income regime and job losses. Indeed, the crime rate is at an all-time high.
While the government may be pointing to the law that makes for an upward review of VAT after two years, the same has not been considered for the National Minimum Wage, which raise has been long overdue too.
The Federal Government will need to drop the idea of a VAT increase now because its implementation will lead to the closure of businesses and more job losses and Nigeria will be the worse for it. Indeed, the people cannot help but resist the increase.
Much as government is right to raise taxes, the expectation of the people should also be considered. A situation where the average citizen provides water, electricity even security for himself, will make anyone ask what the taxes are used for.
Let the people be considered, especially the poor masses, whose income has continued to drop and prices of goods and services, up.