Prominent economic experts in Nigeria have cautioned the federal government against raising the value added tax (VAT) from 7.5 per cent to 10 per cent by the incoming administration.
They are argued that the VAT rate hike, suggested last week by Nigeria’s finance and national planning minister, Zainab Ahmed, would stifle the country’s economic growth.
The finance minister who made the call during a courtesy visit to the headquarters of Voice of Nigeria in Abuja recently, had said, “VAT is one of the ways to increase revenue and we still have to increase VAT because, at 7.5 per cent, Nigeria has the lowest VAT rate in the world, not in Africa, in the world.
“In Sub-Saharan Africa, the African average is 18 per cent, when you increase your VAT, your Gross Domestic Product will grow.
“So, tax compliance has increased. As a result, we have also adjusted our VAT rate from five per cent to 7.5, even though our target was 10 per cent. But you know how it is in Nigeria, we are targeting 10 per cent by the second year, we did so to increase revenue.”
Reacting to this, the Director, Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, said the advice was coming too early considering the previous increase in 2020.
He said it was better to bring more people into the tax net than to impose more burden on those in the tax net.
He said, “The revenue performance from VAT has generally been excellent in recent years. My view is that it is perhaps too early to review it again, especially in light of all the challenges that businesses are facing.
“Businesses are the main contributors of VAT and there are some other taxes that have already been proposed under the finance bill like excise and telecom tax. So, we have to be careful so as not to increase the burden on businesses.
“The better thing is to bring more people into the tax net than to impose more burden on those in the tax net.”
On his part, the Chief Executive Officer, Cowry Assets, Johnson Chukwu, pointed out that the decision to review the tax should be taken by the new government.
He said, “The call is on the new government to decide how they want to review the taxing system and not on the current government to decide.
“We also have to look at how effective tax collection was and not about the amount received. One of the hallmarks of a good tax system is the ease of collection, low cost and convenience of payment.
“VAT is easiest to collect and difficult to avoid but it impacts consumption. Let us allow the new government to come and define their mode of collection.”
Latest data obtained from the National Bureau of Statistics (NBS) showed that Nigerians paid N2.5 trillion to the coffers of the federal government in 2022, being the highest so far recorded in the country.
