Increasing Value Added Tax is going to be hard on people now. It will hit hard on people’s disposable income because inflation has already eaten deep into people’s income and then the devaluation of the naira has more or less reduced the real income of people; things are very difficult now for Nigerians. So, if they increase VAT, it means people will have to spend more.
It is obvious from this perspective that this is not the time to increase VAT. The option to take is the one that will take us out of recession. If you have money and that money does not have value, such a situation is not palatable. I think attention should be focused on increasing the productive capacity of the nation.
Also, government should ensure that other forms of taxes are collected and money remitted to the federal treasury. Government should intensify efforts at recovering all collections and all arrears should be duly remitted to the Federal Government’s coffers.
Ms. Folashade Omowanle (An entrepreneur)
I am totally against it. It can pose a serious threat to those of us that run online business. How exactly is an average citizen supposed to do business when every avenue to thrive is being threatened? I think the Federal Government should reconsider its stance on increasing Value Added Tax.
The prices of goods and services will shoot up for businesses to make up for the proposed VAT increase and other charges the government intends to introduce. How would stressing already weary Nigerians with more bills benefit the government? They are toying with a showdown. You can only push people for so long.
Mr. Tunde Salman (Executive Director, Grassroots Development and Advocacy Centre)
The Federal Government should not increase Value Added Tax. Considering the hardship and high cost of living in Nigeria, the government should think of how to expand the tax base. There are many people who are within the tax net but are not currently captured or even paying tax. These are the people that the government should adopt strategies to ensure that they start paying. Let those who are not within the tax system be included. This means there should be better tax administration but not to increase VAT at this time.
Even now, many people are calling for tax holiday or tax reliefs for many sectors of the economy to enable them to have more resources to stimulate the economy. The major strategy of the government should be how to stimulate the economy. People are already kicking against government’s intention to increase telecoms tax, so, how would one think of increasing VAT?
Mr. Bamidele Ayemibo (Lead consultant, 3T Impex Trade Academy)
We pay a huge amount every month as an organisation and I will not support an increase in Value Added Tax. We pay over N100,000 on VAT monthly. Currently, in Nigeria, less than 20 per cent of business organisation pay VAT. Instead of discouraging people that currently pay, what I expect the government to do is to go after non-paying organisations.
The government has given everyone Tax Identification Number, which means the government can know the companies doing business and monitor those that are not paying. Increasing VAT will make those of us paying feel stupid, whereas some people are not paying and nothing is being done about it. I am not in support on increased VAT at all. The government should devise a means using the TIN, to go after the companies which are currently doing business and paying nothing to the government.
Mr. Sola Adeyiga (An industrialist)
It is important for business organisations to understand the concept of VAT. They must understand products on which VAT is paid, VAT input and output as well as its computation.
Increasing VAT will increase prices generally in the country. VAT is paid by the final consumer. I am a businessman and I produce polythene. If I buy my raw materials, I pay VAT. If I turn the raw materials around to the final product, I add VAT. There is the VAT input which I pay on the materials and the VAT output which I add to the finished goods. The net between the VAT output and input is what I pay to the government.
Eventually, I am not the one paying the VAT, the final consumers pay the VAT. In a situation where there is inflation and cost of living is very high, increasing taxes is not the way to go because it increases all costs across board. Although Nigeria has the lowest VAT rate in the world, if we want to be at par with other countries, we must also consider the situation of the economy.
There is recession and it is difficult to get raw materials and power supply is epileptic. This is not the time to add hardship to the already bad situation.
Mrs. Oyetoun Ibrahim-Akinwale (Director-General, Kwara Chamber of Commerce, Industry, Mines and Agriculture)
I do not think it is right for the Federal Government to increase VAT now. The cost of doing business is high already. Do they want to make it higher? The extra cost of production, because of the increase in VAT, will still fall on the consumers.
An increase in VAT will lead to an increase in production cost and commodities will be more expensive. If the cost of production is higher, it will definitely lead to an increase in the prices of commodities, leading to lower patronage. This will reduce the turnover and the profit of producers. So, it will worsen unemployment as producers cannot employ more hands and may even downsize.
The disadvantages of increasing VAT far outweigh the advantages. On the side of consumers, it will affect them as prices of things will go up and they do not have as much money as before to spend on commodities given the inflation and the low value of the naira. Presently, people cannot buy things and poverty is rife in towns and villages.
If the government increases the VAT, the cost of things will go up and purchasing power of the people will be reduced, there will be unemployment and there will be increased hardship. This is not the right time to increase VAT.
Gbolahan Bilewu (Assistant Director, Corporate Services, The Chartered Institute of Taxation of Nigeria)
I would have only advocated an increase in the Value Added Tax base (bringing more taxpayers into the VAT net) as against an increase in VAT rate. However, in the light of global trend, it has become imperative for our government to harmonise Nigeria’s VAT rate with what obtains within the ECOWAS region. To this end, I will fully support moving gradually away from direct to indirect taxes.
VAT, as a consumption or class tax, would only be payable on consumable goods and services. Records have shown that the compliant rate of direct taxes is higher than that of indirect taxes because its collection processes are easier and with minimal or no cost. However, it is advisable that this VAT rate increase should be compensated with palliatives for the taxpayers, such as a reduction in the current rate of personal income tax and other direct tax rates.
Equally, since “taxation with representation” is also a global trend, government should ensure that stakeholders buy into the VAT rate increase by widespread enlightenment campaign to foster high rate of compliance. Finally, Section 4 of the VAT Act should be amended by the National Assembly to reflect the change so as to avoid any controversy