Since its inauguration in 2015, the administration of President Muhammadu Buhari has categorically proposed economic diversification as the way of ending Nigeria’s monolithic oil dependent economy. Though, the key focus then was on agricultural transformation, government has been looking for all means possible to increase its source of revenue. In an attempt to fulfill it’s promised ‘change agenda’, Buhari’s administration devised all means possible to source more money to be able to deliver its promises. Part of those measures was collection of heavy foreign loans. Though agriculture has not been doing so bad, it however failed to provide the outstanding alternative of revenue generation to support the monolithic oil-dependent economy that generates almost 90% of the country’s income.

For a government that has increasingly financed its fiscal deficit from borrowings, there is no doubt that it needs more innovative approaches to scaling up its revenue capacities to meet its growing funding commitments. It is against this background that on September 11, the Federal Executive Council agreed to an increase in Value Added Tax, VAT from 5% to 7.5%.

Addressing journalists after the FEC meeting in which the proposal was approved, Nigeria’s minister of finance, budget and national planning, Haj. Zainab Ahmed said the government proposed raising VAT to 7.5 up from the current 5%, noting that the current level is one of the lowest in the world. Zainab explained that the increase becomes necessary even though federal government only retains 15% of the tax, leaving 85% to states and local governments. She these two tiers of government therefore need the increase to meet the obligations of the new minimum wage. Although, even prior to the minimum wage, federal government argued that many of the 36 states struggle to pay the workers’ salaries.

VAT in Nigeria is a tax payable on goods and services consumed by individuals and business organisation. VAT is charged on most goods and services provided in Nigeria and also on goods imported into Nigeria except for medical and pharmaceutical products, basic food items, educational materials, commercial vehicles, agricultural equipment and other related goods and services. As Africa’s biggest oil exporter seeks to reduce its reliance on crude sales, president Buhari’s government has repeatedly said that it want to boost non-oil revenue, since oil sales make up 90% of foreign exchange receipt.

The decision of the federal government to undertake this increment was not unexpected as there had been murmurings in government circles on the need for an increase as a veritable way of meeting the expansive fiscal expenditure needs of the federal government that have ballooned over the last five years.

Consequently, the Central Bank of Nigeria, the apex bank in the country says the increase, upon implementation has the potential to increase fiscal revenue to support expenditure and reduce the budget deficit as well as government borrowing. In an interview with Reuters recently, the CBN governor, Godwin Emefiele emphasized that even with what he called ‘the little increase’, the increase may still not cover gap in the government finances. He said government has no any option, and that if the citizens say it should not borrow, then it should increase revenue.

Emefiele added that ”if government must raise revenue, and we think that this should be the only way through which the government can raise revenue to meet its obligations, I think it calls to a rationale that what we are saying is that it is the right decision to say that government has to increase VAT from 5% to 7.5%”. “Nigeria’s VAT rate even at 7.5% might still,be one of the lowest in the world. I appeal therefore to Nigerians to please understand “, the CBN governor added. However, since the declaration of the increase, series of reaction from different Nigerians continue to occupy Nigerian media space.

In a release by the People’s Democratic Party, PDP (the biggest opposition party in the country), an increase in VAT will only worsen what it called the country’s ‘decrepit economy’ and put more pressure on families and businesses, thereby resulting in increase in prices of goods and services. Economists believe that while an increase in VAT in an ordinary case would have been beneficial to Nigeria in the medium to long term. The current reason being proffered for this VAT increase is wrong and will lead to increased corruption and mismanagement, particularly at the state level since most of the money is not earmarked for capital projects or education.

Furthermore, it has been observed that the proposed increase will likely buoy and bolster the purchasing power of Nigerians by increasing the minimum wage, which on paper this government claims is the major reason for this increase to enable states pay for the increment, at best, the utilisation of funds at the state level is heavily mismanaged and the states stand to gain the most from this increase, because they already collect 50 % of all VAT collection proceeds.

Also, because VAT is basically imposed on consumption, it is pertinent to understand that the diminished scale of consumption in the Nigerian economy may affect the collection performance of VAT. From a simple economic point of view, any increase in VAT would disproportionately affect poor people. But even beyond that argument, the biggest challenge is that any increase in indirect taxes affects the price of goods and services.

This in turn would affect the country’s inflation rate. With an inflation rate of over 11 per cent, the outcome of the proposed VAT increase is very critical. To this note therefore, it is justifiable to conclude that the plan by the federal government to finance the increment in the wage burden through tax increment would force companies to raise prices significantly, ultimately placing the incidence of the tax increment on the consumers.

According to them, in effect, it could be seen as a fiscal policy designed to ‘rob Peter to pay Paul’. We also expect the increase in minimum wage to be eroded by price increases of key household items, offsetting the expected improvement in purchasing power. The proposed tax policies will also pose a downside for foreign investments in the Nigerian industrial climate as well as growth of SMEs.

We believe companies who are unable to raise prices might lay off workers in a bid to manage costs, further impacting on the level of unemployment. The reality is that any increase in VAT will be counterproductive to the goals of reducing poverty and inequality, given the existing high economic disparity in the county where there is already a high cost associated with the poor accessing economic opportunities. But then again, VAT will inevitably affect everybody that spends money, both rich and poor.

It’s obvious that Nigeria’s inflation rate has remained in double figures for the last three years as against the CBN’s single-digit target, thereby resulting in increase in the cost of living in the country where most people live in less than one dollar per day. Yes, the Feder Inland Revenue Service (FIRS) were able to generate over N5.2 trillion in 2018 and are targeting N8.9 trillion this year, but, should that be at the detriment of the struggling Nigerians? What then is wrong the this administration’s change agenda of reducing poverty? Time alone shall tell.

Sani Ibrahim Paki writes from Kano saniibrahimpaki@gmail.com

Read more: https://www.dailytrust.com.ng/vat-increment-robbing-peter-to-pay-paul.html

agwom:
Since its inauguration in 2015, the administration of President Muhammadu Buhari has categorically proposed economic diversification as the way of ending Nigeria’s monolithic oil dependent economy. Though, the key focus then was on agricultural transformation, government has been looking for all means possible to increase its source of revenue. In an attempt to fulfill it’s promised ‘change agenda’, Buhari’s administration devised all means possible to source more money to be able to deliver its promises. Part of those measures was collection of heavy foreign loans. Though agriculture has not been doing so bad, it however failed to provide the outstanding alternative of revenue generation to support the monolithic oil-dependent economy that generates almost 90% of the country’s income.

For a government that has increasingly financed its fiscal deficit from borrowings, there is no doubt that it needs more innovative approaches to scaling up its revenue capacities to meet its growing funding commitments. It is against this background that on September 11, the Federal Executive Council agreed to an increase in Value Added Tax, VAT from 5% to 7.5%.

Addressing journalists after the FEC meeting in which the proposal was approved, Nigeria’s minister of finance, budget and national planning, Haj. Zainab Ahmed said the government proposed raising VAT to 7.5 up from the current 5%, noting that the current level is one of the lowest in the world. Zainab explained that the increase becomes necessary even though federal government only retains 15% of the tax, leaving 85% to states and local governments. She these two tiers of government therefore need the increase to meet the obligations of the new minimum wage. Although, even prior to the minimum wage, federal government argued that many of the 36 states struggle to pay the workers’ salaries.

VAT in Nigeria is a tax payable on goods and services consumed by individuals and business organisation. VAT is charged on most goods and services provided in Nigeria and also on goods imported into Nigeria except for medical and pharmaceutical products, basic food items, educational materials, commercial vehicles, agricultural equipment and other related goods and services. As Africa’s biggest oil exporter seeks to reduce its reliance on crude sales, president Buhari’s government has repeatedly said that it want to boost non-oil revenue, since oil sales make up 90% of foreign exchange receipt.

The decision of the federal government to undertake this increment was not unexpected as there had been murmurings in government circles on the need for an increase as a veritable way of meeting the expansive fiscal expenditure needs of the federal government that have ballooned over the last five years.

Consequently, the Central Bank of Nigeria, the apex bank in the country says the increase, upon implementation has the potential to increase fiscal revenue to support expenditure and reduce the budget deficit as well as government borrowing. In an interview with Reuters recently, the CBN governor, Godwin Emefiele emphasized that even with what he called ‘the little increase’, the increase may still not cover gap in the government finances. He said government has no any option, and that if the citizens say it should not borrow, then it should increase revenue.

Emefiele added that ”if government must raise revenue, and we think that this should be the only way through which the government can raise revenue to meet its obligations, I think it calls to a rationale that what we are saying is that it is the right decision to say that government has to increase VAT from 5% to 7.5%”. “Nigeria’s VAT rate even at 7.5% might still,be one of the lowest in the world. I appeal therefore to Nigerians to please understand “, the CBN governor added. However, since the declaration of the increase, series of reaction from different Nigerians continue to occupy Nigerian media space.

In a release by the People’s Democratic Party, PDP (the biggest opposition party in the country), an increase in VAT will only worsen what it called the country’s ‘decrepit economy’ and put more pressure on families and businesses, thereby resulting in increase in prices of goods and services. Economists believe that while an increase in VAT in an ordinary case would have been beneficial to Nigeria in the medium to long term. The current reason being proffered for this VAT increase is wrong and will lead to increased corruption and mismanagement, particularly at the state level since most of the money is not earmarked for capital projects or education.

Furthermore, it has been observed that the proposed increase will likely buoy and bolster the purchasing power of Nigerians by increasing the minimum wage, which on paper this government claims is the major reason for this increase to enable states pay for the increment, at best, the utilisation of funds at the state level is heavily mismanaged and the states stand to gain the most from this increase, because they already collect 50 % of all VAT collection proceeds.

Also, because VAT is basically imposed on consumption, it is pertinent to understand that the diminished scale of consumption in the Nigerian economy may affect the collection performance of VAT. From a simple economic point of view, any increase in VAT would disproportionately affect poor people. But even beyond that argument, the biggest challenge is that any increase in indirect taxes affects the price of goods and services.

This in turn would affect the country’s inflation rate. With an inflation rate of over 11 per cent, the outcome of the proposed VAT increase is very critical. To this note therefore, it is justifiable to conclude that the plan by the federal government to finance the increment in the wage burden through tax increment would force companies to raise prices significantly, ultimately placing the incidence of the tax increment on the consumers.

According to them, in effect, it could be seen as a fiscal policy designed to ‘rob Peter to pay Paul’. We also expect the increase in minimum wage to be eroded by price increases of key household items, offsetting the expected improvement in purchasing power. The proposed tax policies will also pose a downside for foreign investments in the Nigerian industrial climate as well as growth of SMEs.

We believe companies who are unable to raise prices might lay off workers in a bid to manage costs, further impacting on the level of unemployment. The reality is that any increase in VAT will be counterproductive to the goals of reducing poverty and inequality, given the existing high economic disparity in the county where there is already a high cost associated with the poor accessing economic opportunities. But then again, VAT will inevitably affect everybody that spends money, both rich and poor.

It’s obvious that Nigeria’s inflation rate has remained in double figures for the last three years as against the CBN’s single-digit target, thereby resulting in increase in the cost of living in the country where most people live in less than one dollar per day. Yes, the Feder Inland Revenue Service (FIRS) were able to generate over N5.2 trillion in 2018 and are targeting N8.9 trillion this year, but, should that be at the detriment of the struggling Nigerians? What then is wrong the this administration’s change agenda of reducing poverty? Time alone shall tell.

Sani Ibrahim Paki writes from Kano saniibrahimpaki@gmail.com

Read more: https://www.dailytrust.com.ng/vat-increment-robbing-peter-to-pay-paul.html

Increase VAT to 10percent.

It's a Tax on Revenue. Those who don't earn can't pay no Tax. That's why we call it TPM, Tax Payers Money.

That admin that banned me for fighting with his girlfriend...... Ati lo, Ati de
Am ready for more

It doesn't make sense at all.. This government r just bent on making the poor ones become more poor by the time they leave office. The lifeless dosnt even care

Robbing Peter since 1860

Robbing the (mostly poor) masses to enrich politicians.

I tyre o!

When you have stupid people running the affairs of this shithole country Naijiriya, expect stupid policies. Everyday I regret being a Nigerian

Vat in ghana is 12.5 % . Benin 18%. Why we con dey cry

i hope before Online Dunce and Piglets start blaming Buhari they should read the part that states FG only retains only 15% of VAT while State retains 85%...

Now common sense would clearly show that States cant pay salaries with the new minimum wage structures and without the VAT many state civil servants would no get paid or loose salaries .... This one of Buhari's gift to the States and its workers

Useless waste of space called unpatriotic Nigerians want to enjoy basic amenities like Ghanians, SouthAfricans, US, UK, they want free roads, free health care, everyone want government job, or blue collar office jobs but when you ask them to pay tax or contributing towards national development they wail like imbecilees,

just like JfK said: Patriotism is not always about what your country can do for you, but what you can do for your country

and even if you take this freebies loving fools that wail in their own country to ghana , shoutafrica and countries with infrastructures, they still only want to leave off government benefits or constituite nuisance to the countries looking for free money


...

ednut1:
Vat in ghana is 12.5 %

Is Naira and CEDI the same Fact check: 67.15 Nigerian Naira = 1 Ghanaian Cedi

Is the Economies and % of poor masses the same

Can your passport go visa free to most countries

Is their politicians as clueless as ours?

Imagine earning 15,000 Naira and paying a light bill of 5,000 where you live(If that is even a good analogy)/

Naija matter tire person...

D

Inside Iife

Just cos of N30k new minimum wage

FG are planning to increase the tax/vat
FG are proposing toll gates nationwide
FG are planning entrenchments of workers.

Oh my Nigeria

There's no option but to increase VAT. The alternative is to resort to borrowing, which is already getting out of hsnd

OP and co.. you guys should learn how to put up a good summary.

You don't just sit down and write a long Epistle and expect people read it.

This is NL....I can't come here and be reading LONG NARRATIVE ESSAY....

And for those who will quote the whole thread just to reply the OP.....I really can't fathom what really is you guys problem.

Yes
This is like robbing Peter to pay Paul but in this kind of robbery
Peter will be robbing Paul as well
And Paul will be looking for who to rob

And sooner we all become criminals

orisa37:




Increase VAT to 10percent.

It's a Tax on Revenue. Those who don't earn can't pay no Tax. That's why we call it TPM, Tax Payers Money.

Nigeria TPM can't and must not be spent anyhow in Niger Republic and on Almajiris. We can only teach them how to fish. Nigeria TPM must be reinvested on more income generating ventures.

Yes we are proudly in the next level. Only the wailers pay VAT and bank charges.
Only wailers buy fuel @145#

Ok

Do you know the VAT increment was proposed by previous administration and even after Jonathan left office, he urge Nigerians to support the proposed plan if the incoming government make effort to implement it? But because of few who considered themselves to be many among those that hate the president personally won't want to welcome any policy of this government as long as their candidate didn't win with likes and share they were brainwashed with prior to the election.

ednut1:
Vat in ghana is 12.5 % . Benin 18%. Why we con dey cry

go to those aforementioned countries and see if they have reasons to VAT.

as for me, nigeria won't get any better soon. hard times ahead except you are benefiting from this current government and even if you are,wish things don't fall apart, then you'd understand by what they meant by the saying 'Do not pray for easy life'...............

Yahoo government

Robbing their voters to pay the voted

orisa37:




Increase VAT to 10percent.

It's a Tax on Revenue. Those who don't earn can't pay no Tax. That's why we call it TPM, Tax Payers Money.

VAT is not a tax on revenue; it is a tax on consumption. Income tax is a tax on revenue....

We learnt they are now talking about taxing data and voice calls instead of raising vat

Whatever they do, they should look at Churchill's words:

"We contend that a nation that plans to tax itself to prosperity is like a man standing in a bucket and trying to lift himself up by the handle".

Winston S. Churchill

They should start by cutting down cost of running their yeye government and see if they won't pay 40k minimum wage conveniently. Wicked people

No it is robbing Peter and paul,
Do the maths you will see the government is a thief for such high VAT, with low salary increment