Oil revenue shortfall: Experts fault governors’ 20% VAT proposal

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VALUE ADDED TAX red Rubber Stamp over a white background.

…Proposal recipe for social upheaval — Adi Bongo

…Collecting more taxes on masses draconic, insensitive — Experts

By Uthman Salami, Ridwan Adekunle and Matthew Denis, Abuja

Owing to the spate of dwindling Nigeria’s revenue generation, as part of reviving measures to save the economy from heading to the brink, the Governors of the 36 States of the federation have reportedly proposed an immediate 10 per cent, with a timeline upward review of 15-20 per cent raise of Value Added Tax (VAT) on consumable products.

The report of the proposal was part of measures suggested by the Nigerian Governors to President Muhammadu Buhari-led government as reported by ‘Premium Times’ during the weekend.

The move was necessary in order to take some urgent steps as part of coordinated efforts to instil fiscal discipline and prevent the nation from economic collapse.

Speaking exclusively with the Nigerian NewsDirect yesterday, experts have called the proposal a reckless fiscal decision on the part of Governors.

Recall that it was widely reported during weekend that the Governors allegedly advised the President to pay off federal civil servants who were above 50 years of age amongst other economic measures.

Proposal recipe for social upheaval — Adi Bongo

An economist and data analyst at the Lagos Business School, Dr Adi Bongo described the proposal as a recipe for social ‘upheaval’ noting that Nigerians have already been “pushed to the wall.”

While speaking with the Nigerian NewsDirect, Bongo said rather than embark on fiscal recklessness, government should cut down frivolous cost of governance.

He said, “Well, I don’t know why there ‘re emphasis on VAT. It is the easiest source of human revenue. I don’t think that is the way to go. Citizens are already hard pressed by skyrocketing inflation.

“We have exchange rates come off the levers for the better part of this year and in the foreseeable future, giving the threat or the headwinds in the international economic environment and our own crude oil production level. It may soon escalate.

“If anyone is recommending an increment in VAT, it’s just pouring fuel to the fire and the recipe for social upheaval.

“As you will see what is going on in other countries, Sri Lanka, in even Ghana, in one advanced countries. This is not a time for such kind of fiscal recklessness.

“We have issues. Nigerians are still in time to deal with high costs of governance. And the bulk of that is what goes into the pockets of the so called politicians.

“So if there is to be any rational, and reasonable mop up for government revenue, it should start with cutting down the cost of governance, which is cutting down tthe monuments of political office holders.

“If we start from there, there will be huge, huge savings, you know, the government can achieve now. This is the wrong time.

“We’ve had opportunities to somehow streamline and rationalize subsidies. We didn’t do that. So this is not even the time to ask for government to remove subsidies from essential things. If I will not recommend the removal of subsidies at this point in time.

“There is no grounds for me to support anybody who is asking for a rise in VAT at this material time, except to further push the citizens who have already been pushed to the wall.”

Collecting more taxes on the masses draconic, insensitive — Experts

In separate exclusive interviews with Nigerian NewsDirect, experts have declared that raising taxes on the masses is not only draconic but also insensitive.

Responding, the National Vice Chairman of Nigeria Association of Small Medium Enterprise (NASME), Prince Ayodele Tajudeen Ajisifini, said “This will increase the inflation rate because prices of foodstuff will increase with equivalent rate despite salary of workers remain unchanged.”

He stressed that more MSMEs will close shop because operational cost will increase and purchasing power will reduce, adding that loss of job and crime level will increase.

On his part, the Lead Strategist of Nigerian Workforce Strategy and Enlightenment Centre (NIWOSEC) Dr. David Kayode Ehindero stressed that the two ways to augment a dwindling economy is to either reduce cost of governance to enable more public spendings for the masses or task the masses to pay more taxes, which is draconic and not acceptable.

He said, “Increasing taxes in an already burdened and inflation infested society like Nigeria is height of insensitivity. Majority of Nigerians can’t access goods in the market. Nigerians are not living, they are surviving.”

The expert advised the government to look into reducing cost of governance and seal every loophole to the economy to curb corruption and frivolous spendings.

Dr. Ehindero maintained that the government should also look deep into the padding of the annual budget with projects that will have no direct bearing on the economic growth.