VAT: Experts advocate efficiency, transparency in tax collection

Some economists and trade experts have advised the Federal Government to ensure efficiency, transparency and probity in the collection of tax rather than increasing Value Added Tax (VAT).

The experts spoke in separate interviews with our correspondent in Abuja on Monday said that government should instead spread the net in tax collection for increase in revenue generation.

They were reacting to the Federal Executive Council’s (FEC) approval for the proposed increase of VAT from five per cent to 7.5 per cent.

An Economist, Dr Chijioke Ekechukwu, said that an increase in VAT would put more burdens on tax payers than increase in revenue generation

Ekechukwu, a former Director-General, Abuja Chamber of Commerce and Industry (ACCI) stressed the need for efficiency in collection of taxes by the agency saddled with the responsibility.

He stressed the need to check alleged non-transparency among the Federal Inland Revenue Service staff so that more revenues would go to the government coffers than into individual’s pockets.

Ekechukwu said that government should spread the web of tax collection, noting that more revenue would be generated if 70 per cent of Nigerians paid taxes on regular basis.

“It will be good to make sure that Nigerians are making quantum merit tax payments; which means you pay according to what you earn. Many high income earners pay taxes far lower than their income.

“Much as the Federal Government needs more revenues to fund her budget, we should be mindful of the cost and standard of living,” he warned.

Mr Jude Igwe, the Chief Executive Officer of FERATTO Industries Ltd., also expressed dissatisfaction over the proposed VAT increase, saying it would affect the Micro Small and Medium Enterprises (MSMEs) operators adversely.

Igwe said that the increment, which was coming at a time the naira was already devalued would invariably put a lot of pressure on the MSMEs operators in the country if it was implemented.

According to the trade and law advocate, there will be high cost of raw materials, equipment, and the MSMEs will need more money to run factories and businesses.

“Then the MSMEs will also begin to experience less patronage from the people because when prices are increased, people tend to purchase little. It will bring down the level of business activities.

“So, invariably a lot of pressure is going to be put on the population of the MSMEs which is also going to bring down the level of economic activities in the country,’’ he said.

Igwe, who is also the Vice President, Media, ACCI wondered why there should be approval of VAT increase when the implementation of the new minimum wage had actually not taken off.

“It is going to be very hurting to the general public because we know that the economy of Nigeria does not put so much disposable income in the hands of workers.

“VAT increase is really not good news for the economy at this point in time. The government must know that projects are implemented for the living and not for the dead and therefore people must be alive to see the programmes,’’ he said.

Chief Solomon Vongfa, the National President, Nigerian Association of Small Scale Industrialists (NASSI) said that the 7.5 VAT increase would impact negatively on the real sector operators if implemented.

“We expect government to be more proactive and creative to expand their tax base to capture more companies,” he said.

In her opinion, Mrs Angela Ajala, the National President, African Women’s Entrepreneurship Programme (AWEP), said that the MSMEs were already weighed down by many taxation and infrastructural deficit in the country.

According to her, increasing VAT again is as if there is additional pain to existing ones, especially in Nigeria where we do not see the benefit of what the tax payer’s money does.

“Whenever there is an increment, we will be wondering what the revenue will be used for because every woman doing business is practically responsible for providing water, security, electricity, solar, and diesel; the normal enabling environment government should provide.

“So, any additional charges mean prices of services and products will go up.

“Let us see the impact of the revenue, let us see the effect in more power generation, road construction, market access for entrepreneurial among others.’’

The Federal Executive Council (FEC) had on Sept. 11 approved the proposal to increase VAT from five per cent to 7.5 per cent.