According to tax experts in the country, the incoming administration of Bola Tinubu will have to adopt the federal government’s proposed increase in Value Added Tax (VAT) from 7.5% to 10% in order to reduce the country’s borrowing.
Experts who supported the increase said it would increase the country’s revenue and improve the economy if properly channeled.
Prof. Bright Eregha, Department of Economics, Pan Atlantic University, stated that increasing VAT to 10% would benefit the economy.
Nigeria’s VAT revenue is low
Suggesting that the country’s VAT revenue is currently low compared with other countries, Eregha said:
Smaller countries around us are having more VAT collections and why not ours, which has the largest economy in the continent? Increasing VAT to 10% will enhance the revenues and reduce borrowing from international developmental partners.
He added that the incoming government could boost its fiscal revenues by ensuring more eligible payers into the tax net.
Incorporating more people in the informal sector will enhance the government’s fiscal revenue projections, especially now that there is a decline in our country’s revenues. The informal sector is making a lot of money; it’s time to remit anything in form of taxes to the authorities, the professor said.
Also, the President of the Chartered Institute of Taxation of Nigeria (CITAN), Mr Adebayo Adesina, urged the incoming government to give more emphasis on indirect taxes to achieve the 10% VAT increase.
Indirect taxes are the way to go if the government is expected to enhance its revenues. It is a type of tax that is often paid for goods and services without being aware that it is being deducted, Adesina said.
He said that the incoming government should continue to educate the citizenry on the importance of paying taxes for the growth of the economy.
Payment of taxes is crucial for our development in order to address competing needs of the society. Also, the authorities need to show more transparency and accountability to encourage more citizenry to pay their taxes as it is a social contract between the government and the people, he added.
Automating tax collection
In his view, Mr Okechukwu Unegbu, former President, of the Chartered Institute of Bankers of Nigeria(CIBN), said the Federal Government could expand its VAT increase by automating its operations.
Utilising more of technology and accurate data is crucial not to evade tax payment. Many people, who are living ostentatious lifestyles, are short-changing the government by paying less than what is expected, Unegbu said.
He said that the various tiers of government should collaborate more to have an effective tax system in the country.
The Minister of Finance, Budget, and National Planning, Mrs Zainab Ahmed, had recently urged the incoming administration to increase the Value Added Tax (VAT) from the current 7.5% to 10%. According to her, this would stimulate the country’s economic growth.
The minister made the call during a courtesy visit to the headquarters of Voice of Nigeria (VON) in Abuja.
VAT is one of the ways to increase revenue, and we still have to increase VAT because at 7.5%, Nigeria has the lowest VAT rate in the world, not in Africa. “The African average is 18%; when you increase your VAT, your Gross Domestic Product (GDP) will grow, she said.
