EDITORIAL: Planned increase of Value Added Tax, a testament of Buhari’s poor economic judgement
For over a year, the organized labour; the Nigeria Labour Congress (NLC), United Labour Congress (ULC) and the Trade Union Congress (TUC) moved back and forth in negotiation with the government at both the state and the federal level on the need for the increment of the minimum wage to reflect the current economic realities across the country.
As it stands today, the least paid federal government worker is paid N18,000, but the National Assembly with the New Minimum Wage Act pegged the minimum wage at N30, 000. However the Federal Government said it would need to source the fund to pay the new minimum wage through other sources in other to meet up with its obligation.
In obvious resolve of the Federal Government’s economic managers, some of these officials had hinted late last year that there would be an increase in the Value Added Tax (VAT) in 2019. Nigerians took it with a pinch of salt.
However, the Minister of Budget and National Planning, Senator Udoma Udo Udoma and the Chairman of the Federal Inland Revenue Service (FIRS), Babatunde Fowler confirmed the insinuation to the Senate Committee on Finance that an increase in VAT is inevitable with the new minimum wage further plunging the 2019 budget into more deficit.
Their revelation only confirmed what the Minister of Finance, Zainab Ahmed had said earlier in the year about the imminent increment of the VAT.
The government’s plan is to increase VAT by fifty percent thereby increasing it from 5% to 7.25%. This development is anything but a step in the wrong direction and IMPACT NEWS condemns this attempt by the government to laden Nigerians with economic hardship.
It is so unfortunate how the Federal Government would in a hurry forget that Nigerian businesses are yet to fully recover from the recession of the early years of the current administration. To burden such businesses with heavy tax is obnoxious and to say the least ridiculous of the government that plans to get more Nigerians out of poverty and also promised to increase employment generation.
Expectedly, major stakeholders are already mounting pressure on the government to halt its decision on the increase. The Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industry (LCCI) have also charged the government to widen tax net instead of increasing the tax.
The National Leader of the All Progressives Congress (APC), Asiwaju Bola Ahmed Tinubu has also advised the government to rather widen the tax net. Why would the government not listen to these voices of wisdom?
Vice President Yemi Osinbajo had in 2018 said that 14 million Nigerians are currently paying tax. If the population of those paying tax in Nigeria is less 10% of the population then the FIRS should focus on expanding the tax net instead of increasing tax for those who are already faithful with this civic responsibility.
The VP also revealed that less than a thousand Nigerians pay tax of one million naira. Surprisingly virtually all of these persons stay in Lagos and Ogun state in the South-west region of the country.
Over burden such diligent Nigerians with more tax would only discourage other Nigerians from tax payment. Government officials have the responsibility to think outside the box and proffer reasonable solution to revenue generation rather than overburden tax administration on Nigerians.
Government tax managers have the responsibility to fish out Nigerians in other part of the country that are able to pay the one million naira tax and pull them into the tax net. Laudable programmes like the Voluntary Assets and Income Declaration Scheme (VAIDS) should be rolled out to increase revenue generation.
VAT increase is a bold testament that President Buhari is truly a bad economist. It would however be a big shame on his advisers who are adorned with degrees and sterling antecedents in economic management to allow such policy to fly.