Ebonyi State Governor, David Umahi, has opposed the proposed plan by federal government to lift Value Added Tax (VAT) from five percent to 35 percent, stressing that it would put the country in difficult situations.
This is coming as the Federal Inland Revenue Service ((FIRS), Wednesday refuted reports that its Executive Chairman, Mr. Babatunde Fowler proposed a 50 per cent increase in VAT.
The governor further said the plan which was proposed by the federal government in order to pay workers salary with the implementation of the N30,000 minimum wage, was like digging a hole to fill a hole.
While addressing the staff members of his office who were celebrating his re-election, the governor called on the organised labour to sit down with the government to reconsider the plan.
Umahi said with the proposed plan by the federal government, anyone going to buy something will pay 30 percent VAT than it used to be.
He said: “I saw in a newspaper that the federal government is considering lifting VAT to 35 percent to pay salaries. It is all about digging a hole to fill a hole because we have not come to point of realisation or honesty about how to solve our problems, and it is important.
“The federal government is borrowing money; state has been banned from borrowing money. And so, if VAT is lifted from five percent to 35 percent which means that any of us buying anything would pay 30 per cent than what we have been buying. It is important that labour sits down with the government.
“There is no fraud that goes on in civil service that is not being orchestrated by civil servants, and if we can plug down the stealing or cut down the cost of projects, we should be able to have enough to cater for civil servants and non-civil servants.
“We are in for deeper problems all over the country; we all sit down and look at the problems and how to solve it. No governor will perform magic, no president will make magic. If they give us N2billion and the wage bill is N2billion, you can’t perform any magic. You pay only wage bill and then go to sleep.
“No amount of money paid to civil servants can be enough, it is only the one they make themselves that will assist them. If you pay somebody in grade level 10 N50,000 by the minimum wage and he goes to hospital, private hospital, which bills higher because they will pay VAT on the drugs, you will pay more in those drugs . If you go to buy exercise book for your children, you will pay more. You will pay more in everything. So, by the end of the day, civil servants may be crying, so we should go back to status quo, therefore, the increment may not be reasonable.
“I am not against the increment, but when I was talking about the minimum wage, I told you people that federal government was considering doing something to enable them pay-that is raising VAT which is going to be tough for the country. All the building materials will have 35 percent VAT, meaning those who have not build houses will struggle to do so.”
Meanwhile, FIRS yesterday refuted media reports that he proposed a 50 per cent increase in VAT.
In a statement issued yesterday, the revenue agency explained that Fowler position was misrepresented as he actually recommended an increase in the number of Nigerians and companies paying VAT and not the other way round.
“Though he indicated that there should be an increase in VAT rate by the end of the year, he never, for once suggested a 50 per cent hike of any percentage increase at all.
“Rather, he promised improved collection in CIT, Petroleum Profits Tax, PPT and VAT in 2019 relative to the collection performance of the Service in 2018.
“In 2018, FIRS collected the sum of N1.1 trillion in VAT; N1.42 trillion in Companies Income Tax (CIT); and N2.4 trillion in Petroleum Profits Tax (PPT).”
Fowler allegedly told the lawmakers: “My personal opinion is that the rate of CIT should remain at 30 per cent, to make sure that we do not reduce the tax rate, without getting others who are not in the tax net into the tax net.
“But for small businesses, it’s a discussion we are having with the Ministry of Finance for people who are having a certain turnover. I believe that that can be reduced to may be 20 per cent to promote the small-scale businesses. But in terms of immediate reduction, I think we should try and stabilize to ensure a 90 per cent compliance of those in the tax net. I am sure that at the end of the year, we can consider reducing, our corporate income tax rate.”
The FIRS boss was further quoted in transcripts taken during the meeting as provided by its communications unit as saying, “in terms of VAT, the service has increased VAT collection over the last three years by over 25 per cent”.