I know the aim of the Federal Government is to raise revenue but the increment of VAT rate from 5 per cent to 7.5 per cent is ill-timed because people are battling with so many issues in terms of non- availability of finance. Business is not moving as it used to and people are trying to see how they can survive. The issue of VAT increment will be a burden that will be transferred to the end users who are the consumers; it is the common man who will bear the brunt. There are cases of unemployment and quite a number of challenges that are affecting the common Nigerians. I feel at this time, what the government needs to do is to make citizens feel comfortable and increase their welfare and not the review of VAT.
The President signed a financial bill into law with 7.5 percent VAT increase but cannot implement minimum wage, so even the peanuts the civil servant are receiving will still be reduced. This would have an impact in the increase of goods and services at a time when many Nigerians are just surviving and economic recovery is poor. Consumers will cut back and the consequence will be felt in sales and business activities. Of course Nigerians being nonchalant and docile will accept the additional hardship.
There are indications that the increase in the rate of the VAT as spelt out in the finance law will lead to hike in everything. Although, it is to boost revenue but a lot of the masses will suffer for it because VAT is added on almost everything in this country. This is an unfair arrangement to common Nigerians who are leaving from hand to mouth. The burden of such increment would be passed onto the consumers who in most cases are the masses.
As an entrepreneur, I don’t think government has basis for increasing tax when it has not improved on infrastructure to create enabling environment for Small Medium Enterprises (SMEs). Here in Nigeria, many of us have to spend so much on infrastructure. So, what is the basis for increasing VAT? What infrastructure has been improved on before increasing tax? All the previous VAT that have been paid, what has been done with it? Electricity is epileptic. The government has not fixed the road to make it more accessible or improved on electricity so I have to use generator for 12 hours a day. The consumers are going to feel the impact of the tax more because the increment will directly be transferred to customers such that it will impact on their perceived earnings and savings. Sales may be affected and the purpose for which the VAT was increased may not be achieved and government generated revenue from this source might reduce. What I think the government needs to do is aggressive taxpayer enlightenment and expansion of the tax net to capture more citizens as it has been speculated, arguably that less than 40 per cent of Nigerians are tax compliant. The government should also put mechanisms in place to eliminate leakages as a large chunk of the Internally Generated Revenues (IGR) realised does not find its way into government’s coffers.
According to a research carried out, I found out that Nigeria’s VAT rate is among the lowest around the neighboring counties and I know the increase will definitely boost government’s revenue, which is what our leaders are clamoring for. But the proposal to increase the VAT rate from 5 percent to 7.5 percent is not timely as it will result in a cost-push inflation, which will negatively affect the purchasing power of the country’s currency and this could lead to less consumption, which in turn could result in filled stores and warehouses due to unsold inventory. This will ultimately lead to retrenchments and increased unemployment with the attendant social implications. This is a wrong timing for the implementation of the increment I must say.
An increase in VAT rate is likely to result in an increase in the final price of goods and services; increase in the cost of production; rise in inflation; erosion of the purchasing power of the average Nigerian; reduced competitiveness of Nigerian goods and services in international markets and increase in unemployment. I would say expanding tax net, implementing tax reforms, and ensuring robust tax administration will lead to increased government revenue with less negative impact on the economy at large. I will suggest that the government should strengthen efforts to expand the tax net rather than increasing tax rates.
The implementation of the VAT increment is laudable because the revenue base of the government would be diversified, which would reduce its presence in the debt market and reduce cost of borrowing. I must say it is a good step in the right direction.
There is nobody who will say government should not generate revenue. I am not necessarily against the increase in VAT, rather I would say the government should also implement measures to cushion the impact of the increment. I want to urge the government to make sure that the added revenue to be realized from the tax should be for the general well-being of all Nigerians.
I want to urge the Federal Government to utilize the extra income to be generated from the increase in VAT and other taxes to improve infrastructure and the revenue should be judiciously use for the benefit of Nigerians. Also, government should utilize the revenue in improving the road, power, education and health infrastructure in the country.
I understand the fact that what the Federal Government is trying to do with the increment from 5 to 7.5 percent is to create the environment where we are able to provide schools, health care and virtually every sector of our national life and have an economy that works for everyone. That is why there is an urgent need for more revenue for Nigeria. So, I believe it is of good effect which we would all see the benefit for our country at the end.
The implementation of 7.5 per cent VAT increment is really not a problem if the motive behind it is right. My concern is what has become of all the revenues raised by the government since inception? Is there any evidence of a positive effect of the proceeds on the common man? These are the questions Nigerians want answers to and the President should have provided answers before signing the finance bill.
This is still shocking to hear because how can the Federal Government increase VAT to 7.5 percent, which to me is very unfair and displeasing to citizens of Nigeria due to the situation of country right now. The implementation of the tax increment would impact negatively on the income of average Nigerians especially if the taxes are not judiciously utilized. This would discomfort many Nigerians as the prices of goods and services will increase. I remember the Ministry of Power in 2019 disclosed that there is need to increase the electricity tariff, which might make Nigerians start paying more on electricity supply. All these will automatically lead to hardship because the level of increase is not commiserate with the salary increment for civil servants (minimum wage) even as many who are not civil servants are facing retrenchment daily in the private sector.
I am not in support of the implementation of the 7.5 percent VAT increase coupled with the rising inflation rate because more hardship will be experienced by citizens. It is very clear that the government does not put her citizens into consideration before implementing its laws. I know the government is trying everything possible to generate revenue for the country but Nigerians still do not trust government in judiciously utilizing the taxes collected. How sure are we that tax offices like Federal Inland Revenue Services (FIRS) and Lagos Internal Revenue Service (LIRS) are remitting all the taxes collected? If they are truly doing that, then there won’t be need for increment. I urge the government to pay more attention on the tax collectors in order to see if they are doing their job rightly. We pay for a lot of things through our noses in this country. There are too many taxes citizens pay for, which I feel is not appropriate. In as much as the Federal Government decides to increase taxes given that the country has one of the lowest tax to GDP ratios in the world, the multiple taxes will not guarantee more tax revenue. The government should rather encourage those paying taxes to meet up their obligations as regards payments at all times. My worry is that because there are too many leakages, inefficiencies and corruption in the tax system, the efficiency of the tax collection may not be achieved and be of benefit to the people.
The VAT increase will lead to increment in the cost of doing business and it will reduce profit income. Permit me to say that the Federal Government may achieve the opposite of the aim of the policy because a drop in the volume of sales and the additional fall in profit due to possible reduction in buying and consumption would also lead to a drop in the value of VAT collections, which means that the money the government is trying to get by increasing VAT, they may eventually not get it because sales will be reduced and this development may increase burden of business owners and place more burden on customers. What I expected was that the Federal Government would have expanded the tax net to include Companies/Organisations/Enterprises not paying tax and also put up monitoring to avoid tax evaders.