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Increase VAT to 7.5%, RMAFC urge FG

Posted: Jul 14, 2016 at 6:47 pm   /   by   /   comments (0)

Isuma Mark

Abuja – The Federal Government has been urged to increase Value Added Tax (VAT) from 5 to 7.5 per cent  to shore up the country’s revenue base.

This call was made on Thursday in Kano by Mr. Shettima Gana, the Chairman, Revenue Mobilisation, Allocation and Fiscal Commission  (RMAFC), at a two-day National Revenue Retreat.

Explaining on new strategies that can expand the revenue base of the government, Gana said that Nigeria’s current VAT rate of 5 per cent was very low.

According to him, the charge being collected on goods and services in the country was one of the lowest in the world.

South Africa VAT was 14 per cent , Togo, Senegal, Guinea and Chad have VAT of 18% respectively. Niger meanwhile has VAT of 19 per cent he cited as examples as to why the country needs to increase her VAT.

He called on the Federal Government to initiate process to that would enable increase in VAT between 7.5 per cent  and 10 per cent .

VAT is a major source of revenue he said and could be used to shore-up revenue required for financing the ever-expanding public expenditure and the needs of all the tiers of government, Gana said.

A comprehensive research should be initiated, he said, to collect data from the Corporate Affairs Commission, (CAC) banks, and state ministries of trade and others, to determine and capture all possible VAT targets.

He added that taxation was seen globally as the most stable source of government revenue for economic development, yet it was not being properly utilised in Nigeria.

He called on the Federal Government to introduce additional taxes, such as toll tax for road, luxury goods tax on mansions, exotic cars, private jets and jewelleries. Also, the government should introduce inheritance tax, which would be paid by a person who inherits money or property from dead relations, he added.

As additional sources of income, he said it was imperative to develop agriculture, mining and tourism sectors, as he said are possible huge revenue sources for the government.

According to Gana, governments should enhance collection efficiency of taxes and block leakages in revenue collection. As a way to ensure efficient method, he urged the governments to beef up revenue monitoring and intelligence gathering.

With the introduction of new taxes, he said, government would generate more revenue to ultimately expanding the economy, which could as well create employment.

Speaking at the event, the Director, Revenue and Investment in the office of the Accountant-General of the Federation, Mr. Bakari Wadinga, said there was urgent need to harmonise Personal Income Tax (PIT) collection.

According to him, government should FIRS should be allowed to take over the collection of PIT and should model it after VAT collection. He stated that the current practice where every state collects its own PIT was not only ineffective but also leads to huge revenue loss.

Mr. Wiadinga said, “It will be recalled that prior to the introduction of VAT in 1993, it was the sales tax which was being collected by state governments.

“In 1992, the total collection by the entire states of the federation put together, was less than N300 million, but by 1994, when VAT came into effect, the total VAT collections rose to N7 billion,” he explained.

He added that, “By 1995 it rose to N21 billion and 10 years after, VAT rose to N222.6 billion in 2006 and over N700 billion in 2013.

“Thus, greater tax revenue could be raked in if there is collaboration on PIT collection by both states and federal government,” he said.

Wadinga said that if this was adopted, it would result in greater tax revenue generation for sharing.

VAT is collected by the Federal Inland Revenue Service and shared to the three tiers of government. The Federal government receives 15%, state governments, 50% and local governments, 35 per cent .

It could be remembered the Managing Director of the International Monetary Fund, (IMF) Christine Lagarde, during her visit to Nigeria early this had said, “The current VAT rate is among the lowest in the world and well below the rates in other ECOWAS members—so some increase should be considered.”