Industrialists and experts have opposed the idea of increase in the rate of Value Added Tax (VAT) in Nigeria.
The Federal Inland Revenue Service (FIRS) yesterday said Nigerians should brace up for an increase in VAT by between 35 per cent and 50 per cent from the current 6.75 per cent and 725 per cent.
Rejecting the idea yesterday, the Abuja Chamber of Commerce and Industry (ACCI) said “Nigerians, particularly those in engaging in SMEs activities, are already overburdened with tax. It will further make doing business in Nigeria harsher and also increase cost of production and services.”
An economist, Dr. Chijioke Ekechukwu, told newsmen that what the FIRS needs is not to increase taxes.
“They need to be more efficient in the collection. Many Nigerians with very high income or savings are not paying Quantum Meruit taxes. They pay far less than their income. Many Artisans don’t pay taxes. Vulcanisers, mechanics, plumbers, electricians, etc. have never paid taxes before,” the expert said.
Dr. Ekechukwu, a former Director General of ACCI, said if taxes are increased, the inflation rate will jump again, adding that “Disposable income of workers and business men and women will be eroded.”
The Executive Director of the Civil Society Legislative Advocacy Centre (CISLAC), Auwal Musa Rafsanjani, said the proposed VAT hike is not fair because the wages and salaries in Nigeria are not reasonable to keep decent living.
“In a situation where social services are not working life and living conditions will get worse and poverty will increase,” he told Daily Trust.
He said the government can mobilise resources by cutting the cost of governance, minimizing waste and blocking stealing.
‘Govt must justify tax increase’
Commenting, Dr. Bongo Adi, lecturer at the Lagos Business School, said though VAT needs to increase, the government must justify the tax hike.
“We understand that Nigeria remains the lowest in the world when it comes to VAT. Some people have argued that it’s about time VAT is increased from the current 5 percent. You don’t find that anywhere in the world. Tunisia is about 30 percent.”
He said “We need to improve the welfare of consumers. The minimum wage increased by about 80 percent and if VAT rises by about 35 percent, the difference is still significant. That means about 50 percent welfare improvement which means the workers may still be better off.”
“However, tax payers are always sceptical because government doesn’t always apply the tax revenues judiciously. Over the years, people prefer not to pay tax. With an increased tax, we should expect improvement in the supply of public infrastructure,” he added.
Johnson Chukwu, the Managing Director of Cowrie Asset Management, said: “The economy is still fragile, so government cannot resort to increase to support the budget.
“The problem is that the middle class is non-existent and only a fraction of the elite are paying tax. So an increase will affect the poor and make them poorer.
“The economy today is not in the position to create jobs. The government does not have the revenue to build a larger budget, we must put the enabling laws in place to enable the private sector pilot infrastructure development,” he said.
