On Thursday, the Senate passed the Finance Bill which seeks to hike the Value Added Tax(VAT) from five percent to 7.5 percent, leaving business owners and financial experts in outrage.
The chairman of the committee, Senator Olamilekan Adeola, said the bill specifically sought to amend Nigeria’s tax provisions and make them more responsive to the tax policies of the federal government. He added that the amendment and the passage of the bill would enhance the implementation and effectiveness of the government’s tax policies.
Claims made by the senate are that the initiative was to reform the tax system, adding that the proposed modifications to the fiscal rules around taxation were clearly aimed at creating an enabling business environment to minimize the tax burden for Micro, Small and Medium Enterprises. The bill purely intended to streamline the tax system in Nigeria and get revenue for the government to provide services and infrastructure to the citizens.
However, industrialists and experts have rejected the idea of a possible increase in the VAT rate, saying it will add to the hardship of Nigerians, increase inflation in the country and an increase in market operations, especially the informal sector.
The Director-General of Manufacturers Association of Nigeria( MAN), Segun Ajayi-Kadiri argued that the increase is ill-timed. He said it is ostensibly aimed at increasing the revenue portfolio of government. He further said it will impose a significant burden on the private sector and on the average Nigerian.
Similarly, the Director-General of Lagos Chamber of Commerce and Industries (LCCI), Muda Yusuf said that the upward review of the VAT at this time will hurt businesses, the economy and citizens.
According to him, many businesses are currently grappling with high production and operating cost which has made sustainability difficult for many enterprises. He noted that there is also the pressure of costs driven by high-interest rates, huge logistics cost, high energy cost, and high regulatory compliance costs.
Nigerians, particularly SMEs are already overburdened with tax. The hike will increase the cost of production and services and also make doing business in Nigeria difficult.
More so, the wages and salaries earned by most Nigerians are not enough to meet their needs, the increase in VAT will only add to their burdens. Most Nigerians live slightly above the poverty level, with little or no access to basic social amenities.
The Federal Executive Council had in September this year approved an increase in VAT and sent a bill to the National Assembly for consideration. On October 14, President Muhammadu Buhari sent the bill to the legislature after which it was finally passed yesterday following a clause-by-clause consideration of the report by the Committee on Finance.
By Faith Ikade.