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Whereas after long speculation surrounding the Value Added Tax (VAT) hike, the Federal Executive Council (FEC) last week approved a 220bps increase in VAT from 5.0% to 7.2%, development economists have started asking questions on the sanity in allowing states that outlawed sales and consumption of alcoholic drinks which contribute over 60% to VAT collections.
Experts say ahead of the implementation in 2020, which is subject to amendment of the extant VAT law, there should be a restructuring which should either separate all VAT collections from sales of alcoholics and share amongst states that allow the business or an Executive Order outlawing any form of restrictions on sales of hot drinks in any state that showed interest in getting shares from its VAT.
Observers say this matter has become necessary based on the fact that several states in the north that practice Sharia outlawed sales and consumption of hot drinks but share in the VAT allocations. For instance, Kano State’s Sharia Police, the Hisbah has been raiding hotels destroying bottles of alcoholic drinks and even impounding bear delivery vans with products across the state, but still yet, the state gets loin share from monthly VAT allocations from Federal Government.
Followers of the development say it amounts to not only robbing Peter to pay Paul but height of travesty of justice therefore cannot be allowed to stand in the regime of hiked VAT.
In its argument for the VAT hike, Federal Government stated the increase was being proposed to help the states and local governments fund the new minimum wage.
Whist development economists recognize that the magnitude of the VAT hike will not significantly boost FGN revenue, they, however, see a strengthened revenue base for the local and state governments, as 85% of total VAT collected is allocated to them.
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