THE chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Shettima Gana, recently called for an increase in the five percent Value Added Tax (VAT) operational in the country to between 7.5 and 10 per cent,  to shore up national revenue base. He argued that at five percent, Nigeria has one of the lowest VAT rates in the world while South Africa and Niger have 14 and 19 percent VAT rates, respectively. Togo, Senegal, Guinea and Chad were said to have their VAT rates pegged at 18 percent.

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As convincing as Shettima tried to sound on this matter, his call for higher VAT rates is untimely. At this time that Nigerians are reeling under the weight of sundry economic challenges, with inflation already at an all-time high of 16.5 percent, we do not see how 50 to 100 percent hike in VAT rate will benefit the generality of our people.  Such an increase, which will surely lead to sharp increases in the prices of consumer goods and services, can only make life more difficult for ordinary Nigerians. It will, indeed, be a very insensitive and unfortunate thing for the government to do at this time that many workers are being owed several months’ arrears of salaries.
We are, therefore, unequivocal in our decision to stand with beleaguered Nigerians against the proposed higher VAT rates.  Let the government come up with effective strategies to reduce the financial burden of the people and not increase it with a scheme designed to make them pay more for consumer items.   Already, Nigerians are being made to pay more for banking services, electricity, petrol and basic food items.
The argument on the higher VAT rates paid on goods and services in other countries is somewhat one-sided. It does not, for instance, say anything about other variables that are critical to the issue at hand.
For example, it does not say anything about the higher number of taxable goods and services in Nigeria and how this impacts on total VAT receipts, when compared with what obtains in much smaller and less industrialised African countries. It does not say anything about the recent increases in the pump price of petrol and electricity, the backlog of salaries owed public sector workers, the skyrocketing inflation and many other factors that should make the taming of inflation a priority of the government at this time.   Are the mentioned countries currently grappling with these serious challenges?
In Nigeria, the cost of a litre of Premium Motor Spirit (PMS) or petrol moved from N85 to N145; diesel moved from about N125 to over N200. Ditto for kerosene, which moved from about N80 to over N220 per litre. There has also been an intensification of revenue drives at all   levels of government to shore up their internally-generated revenues.
These have already imposed a huge burden on the citizens and businesses, with a noticeable movement of some businesses out of the country. VAT is a consumer tax, the increase of which will likely further erode the purchasing power of citizens. Increase in VAT at this time could lead to further closure or migration of businesses out of the country. It may also lead to job losses.
On this matter, we will rather identify with the thinking of Finance Minister, Mrs. Kemi Adeosun, who earlier stated that the best way to increase revenue from taxation might  be to expand the tax loop to ensure that items and persons presently left out are captured. Adeosun reiterated this point at a recent retreat where she affirmed that the Federal Government has identified over 1,000 revenue lines apart from oil, from which adequate revenues can be generated to fund government spending. This is the kind of creative thinking that Nigeria needs at challenging times like these. Government and, indeed, all citizens need to think out-of-the box, if Nigeria is to get out of the economic woods and realise its potentials.
We urge Gana and the RMAFC to join forces with the Finance Minister to tap the window of opportunity she has identified, instead of this plan to increase VAT rate. The point has been well made. Nigerians and all good citizens all over the world willingly pay taxes when they see the positive things their governments do with the revenues they generate. In other words, citizens are responsive to accountable and progressive governments. So, Adeosun’s approach of increasing tax compliance levels will resonate more with Nigerians, even if they are somewhat already overburdened, provided government is ready to meet its basic obligations to them.
In addition, government must think of other ways, apart from taxation, to stimulate the economy and shore up the nation’s earnings and revenues. This is why we support the renewed vigour with which government is pursuing its economic diversification programme. Agriculture and solid mineral resources offer a veritable route out of our present economic quagmire.
Government must move away from the rhetoric of past years and strive to actualize the vast potentials in these two sectors. This, added to the provision of strategic infrastructure and optimally harnessed human resource, will significantly improve the economic fortunes of the country.