Following the planned in
crease in Value Added Tax (VAT) from five per cent to 10 per cent by the Federal Government, a university lecturer, Dr. Steve Wordu, has thrown his weight behind the policy.
Wordu, a sociology lecturer in the University of Port Harcourt who bared his mind while speaking to our correspondent in an exclusive interview in Port Harcourt on Thursday said that Nigeria was an under taxed economy.
He said various sources of taxes were not properly explored in order to generate revenue  for the government.
VAT, specifically according to him is taxation on certain services and items that are highly consumed by the elite and rich.
He said since it was an indirect tax on leisure items, the federal government increasing VAT rate from five per cent to 10 per cent  “is a good one and a welcome development”.
He said the policy would help to boost the federal revenue and at the same time discourage consumption of certain products and services.
However, he expressed reservations on the mode of collecting the VAT proceeds and how such funds were disbursed.
“But the issue or grouse I have with VAT is on how it is collected and how it is distributed”, he said.
Given that the service providers or hoteliers are the ones that give a check off of the VAT proceeds,  Wordu expressed reservations on how  prudent  these funds are handled.
According to him, the improper supervision of these funds could  defeat the purpose of the whole process.
“How it is supervised may also defeat the purpose for which the VAT is collected because service providers can collect the VAT and not remit it accordingly”.
He said in order to checkmate such occurrence, tax officers should be able to ensure that those  service providers remit such funds promptly and adequately to wherever it is supposed to be  paid into.
Again, he opined that since VAT was collected by the Federal Government, the distribution of the accruing revenue to states should also be looked into.
He described as unreasonable the system  where the federal government collects VAT and remits to the states.
Wordu advocated for a reversal of the practice.
“Let states collect VAT and remit to the federal government whatever percentage they should give to the federal government and not the other way round,” he said.
For instance, he explained that some states are not VAT viable yet they would benefit from the federal pool.
“For example, Bornu State where you have Boko Haram, such states cannot generate VAT because the services that are required have been closed.
“Yet they are expected to  benefit from VAT whenever it is distributed by the federal  government”, he said.
He explained that some states were deliberately killing their economy by ignoring whatever that would generate tax through one guise or the other, even as he said such states were only dependent on oil.
He further said VAT was another form of revenue generation avenue  like tourism, so the state of insecurity in some states and laxity in governance of such states have deprived the government of VAT.
Such states, he said do not  deserve to benefit from VAT proceeds because it was like reaping where one did not sow.