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…Gives reasons why VAT may be hiked sooner in Nigeria
The Executive Chairman, Federal Inland Revenue Service (FIRS), Mr. Babatunde Fowler, has given deeper insights on why tax payment compliance in Nigeria is sounding strange to many Nigerians.
Besides, he hinted that even though there is no official government position to increase Value Added Tax (VAT), the need to drive infrastructure and allied development in the country may force the government review VAT upwards to about 7.5% from the present 5%.
In an interview on Arise TV, monitored in Lagos, the former tax boss in Lagos State, said “If I can go back to history a little bit, in the early 70s when Nigeria started to export palm oil in commercial quantities, and people realised that the revenue generated from oil was sufficient to carry out respective budgets, both at the federal and state level, people forgot about taxes.”
According to him, within the period which is about 30 to 40 years, governments relied on oil but now, “We have now come to the realisation that the only way to ensure sustainable economic and social development is through tax revenue”.
Fowler averred that “Now, it is clear that every developed country has to look inward, has to have their citizens pay taxes to fund government on a consistent level and that’s where we are now. We are reforming our tax system, we are trying to make sure that regardless of the oil price, both the federal and state government would have sufficient revenue to meet their mandates and provide a conducive environment for business and for living”.
In his argument, he noted that “Based on my personal opinion, I think VAT should be increased and I would give you two reasons: First, VAT in Nigeria is one of the lowest in the world, the only other country that charges VAT is Dubai in the UAE and they recently introduced it”.
“VAT is a consumption tax, meaning that if you don’t consume or make a purchase on certain items, you do not pay VAT. VAT is the fastest growing tax type in the world and 85 per cent of it goes to the state government. A lot of state governments complain that they do not have sufficient revenue to pay salaries and carry out capital projects and this is one way for them to have additional revenue.
“So from the stand point of a tax administrator, in term of economics, it is only logical that once you expand the tax net, you get a higher level of compliance, you take a view and see how much VAT is being generated in the country and then if need be, I’m sure that maybe next year, people would reason with the government and once they see the impact of this additional revenue, I’m sure that the increase of VAT should not be an issue,” Fowler averred.
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