- Governors in Nigeria wants the Value Added Tax Rate Reviewed.
- Suggests that civil servants above 50 years should be compulsorily retired and paid off.
Nigeria-Inflation is fast raising the concerns of different stakeholders in the economy. Two years after the Federal Government increased the Value-added tax (VAT) from 5% to 7.5%, Nigerian governors are clamouring to get it increased to 20% to further alleviate the strain on the economy by the recent inflationary trend.
This according to the governors is to raise the government’s revenue and reduce expenditure. The governors demanded that the increase be done progressively from the current 7.5% to 10%, before increasing it to 15%, then raising it to 20% eventually.
Africataxreview.com has however gathered from the submission of experts that the downside to this proposed move if approved, will be a further increase in the cost of goods and services in a country that is already battling soaring inflation that has spontaneously raised the cost of living.
Nigeria-Inflation: Further Suggestions by the Government
The suggestion of the increase by the governors came during a recent meeting with President Muhammadu Buhari, suggesting alongside the re-introducing VAT into the Exclusive Legislative List.
They also urged the president to cancel state-level profit income tax (PIT) but introduce a 3% federal income tax, and introduce state sales taxes of 10 per cent across the 36 states and FCT.
A revisit into the decision to drop the subsidy, and also cancel NNPC-funded projects, as this will help them save enough funds.
Other demands include the reduction of empowerment programs, personnel costs of Ministers, Departments, and Agencies (MDAs), as well as pause MDAs, FIRS, NPA, NIMASA, and NCC foreign trips.
They also asked that federal government officials and their families have limited access to visa approval unless granted by the presidency.
This is expected to increase the availability of foreign exchange, which will grow Nigeria’s reserves, at a time the excess crude account fell to $376,655 from $35.37 million.
Finally, they demanded that the president speed up the sell-off of Niger Delta Power Holding Company (NDPHC) power plants, which are non-performing assets.
Nigeria-Inflation: Paying Off Civil Servants Above 50 Years
The height of the advice pushed to the president to salvage the economic fortunes of Nigeria is to make a one-off retirement package for public workers above 50 years to leave the Civil Service which they believe is a huge consumer of the scarce available revenue.
The governors in the light of this suggestion pointed out that the federal government for the year alone will spend a whooping sum of ₦4.1 trillion to pay the civil service population which is just about 89,000.
Nigeria-Inflation: VAT Recent Trajectory
As a result of signing the Finance Bill 2020 into law by President Buhari shortly after its passage by the National Assembly, Nigerians away from a 5% VAT are not expected to start paying 7.5% VAT.
According to the President 2 years ago when this was done, the Bill had five strategic objectives, in terms of achieving incremental changes to our fiscal laws.
These objectives are; Encouraging fiscal equity by extenuating instances of regressive taxation; Reforming domestic tax laws to align with global best practices; Introducing tax incentives for investments in infrastructure and capital markets; Supporting Micro, Small, and Medium-sized businesses in line with our Ease of Doing Business Reforms; and Raising Revenues for Government.
Recall that the 2020 Appropriation Bill was based on the 7.5% VAT rate which the Federal Executive Council (FEC) approved exactly on September 11, 2019.
The 7.5% VAT took effect in the first quarter of 2020 and is expected by the presidency to ensure that the government has more funds to finance key government projects.
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