The federal government’s plan to hike the Value Added Tax (VAT) from 5 per cent to 7.2 per cent yesterday, came under severe attack from workers, private sector employers, financial experts, and the opposition Peoples Democratic Party (PDP).
They described the measure as anti-people and designed to wipe off the gains the workers made from the recent minimum wage increase from N18,000 to N30,000.
The Nigeria Labour Congress (NLC) and the Nigeria Employers’ Consultative Association (NECA) said that the decision by President Muhammadu Buhari’s administration to increase VAT from 5 per cent to 7.2 per cent would make nonsense of the new minimum wage increment.
The plan to hike VAT was announced on Wednesday by the minister of Finance, Hajia Zainab Ahmed, after the Federal Executive Council (FEC) meeting.
NLC general secretary, Comrade Emma Ugboaja, told LEADERSHIP Friday in an interview that the VAT increment was not well thought-out as it would affect the job creation drive of the federal government.
He said: “We reject the increase as it clearly seeks to erode whatever purchasing power the new minimum wage may bring. We see it as a move not well thought through with the welfare of Nigeria wage earners in mind. Its impact on Nigerian manufacturers and job creation and retention will be nightmarish. It is clearly insensitive to the plight of the ordinary Nigerians. What the government needs to do is to widen the tax net and get people to pay tax and not to over tax those that are at present in the net.
In his reaction, NECA’s director-general, Mr Timothy Olawale, faulted the timing of the announced increment of VAT. He argued that the benefits of the recently signed national minimum wage of N30,000 would be neutralised by the proposed increase in the consumer or sales tax.
Olawale said that the increment would further reduce the purchasing power of the citizens, lead to increase in prices of goods and services, rise in inflation rate, and further contraction of the economy.
According to him, recently released data of the country’s Gross Domestic Product (GDP) growth indicated a contraction in Q4, 2018 (2.38 per cent), Q1, 2019 (2.10 per cent) and Q2, 2019 (1.94 per cent).
“Also, International Monetary Fund (IMF) has recently revised downward its global economic growth forecast to 3.2 per cent due to sluggish in global economy.
“Therefore, this suggests, that at such period of time, economies should be formulating fiscal measures/policies to stimulate their economies,” Olawale said in a statement he issued in Lagos.
Similarly, a financial expert, Dr Suleyman Ndanusa, has condemned the move warned that the planned VAT increment would deal a deadly blow on the purchasing power of Nigerians.
He told the News Agency of Nigeria (NAN) in Lagos that the timing was wrong, considering the current economic challenges.
Ndanusa, former director-general, Securities and Exchange Commission (SEC), said that the proposed VAT would affect the demand for goods and services.
Ndanusa said that companies would suffer if people did not buy their goods and services because of VAT increase.
He said: “If people do not demand for goods because of more tax burden, it will affect the companies that produce them. And if the companies that produce them are not making money, it will obviously affect their profitability and income.
“The timing is quite wrong; at this point in time, our economy needs to be helped by policies that would ginger more consumption and more disposable income for the people. The paradigm for me has to change. Are we increasing tax just for the purpose of revenue or managing our fiscal policy taxation for growth?
“The paradigm has shifted from revenue-driven taxation to growth-driven taxation,” Ndanusa stated.
He advised that “Nigeria should be thinking on what to do to create the genetic energy for our economy at this time, where we are growing at 2.5 per cent.”
He explained that government needed to introduce incentives, reduce interest rates and pump up consumption to help the economy to grow instead of increasing taxes.
“The approach must be holistic, obviously at time like this when there is a seeming recession or coming out of recession.
“Government needs to pump up consumption; when you begin to tax expenditure just for the purpose of revenue, it will further dampen demand and it will affect businesses,” he said.
Decision Anti-people – PDP
In reaction to the proposed increase in VAT, the PDP, on its part, said that it totally rejected the decision by President Buhari to increase the VAT, saying that Nigerians cannot bear the burden under the prevailing “agonising economic situation.”
The PDP, which issued a statement on the VAT issue, said that the decision was “anti-people, suppressive and further confirmed the Buhari Presidency as extremely exploitative, inconsiderate and absolutely insensitive to the sufferings which it has plunged Nigerians into in the last four years.”
Its national publicity secretary, Kola Ologbondiyan, who signed the statement, insisted that the decision to increase VAT on already impoverished citizens was in bad faith and cannot be justified under any guise.
He said: “Indeed, only an administration that does not have the mandate of the people can seek to adopt such oppressive stance against its citizens.
“President Buhari ought to be aware that an increase in VAT will worsen our decrepit economy and put more pressure on families and business as it will result in increase in costs of goods and services that have direct bearing on the welfare of the people.
“Our party charges the Buhari Presidency not to further punish Nigerians by imposing harsh tax regime to make up for its crass incompetence and lack of capacity to effectively harness and manage our resources to create wealth for the benefit of the people.
“It is even more painful that the Buhari Presidency cannot give account of the huge resources at its disposal, including the taxes it has been collecting in the last four years, most of which are frittered to service the wasteful lifestyle of the cabal at the Presidency and All Progressives Congress (APC) chieftains.
“Instead of foisting more tax burden on Nigerians, the PDP charges President Buhari to account for and recover the over N14 trillion oil money established to have been stolen under his watch in the last four years.
“It is disheartening that at the time Nigerians ought to be enjoying the economic recovery and empowerment blueprint set out by Atiku Abubakar, which included slash in taxes and levies, they are rather faced with an unjustifiable and indefensible tax increase,” the party added.
The PDP appealed to the National Assembly to protect Nigerians and save the country from collapse by rejecting “this injurious decision by the Buhari Presidency.”
Senate To Invite Finance Minister, FIRS Boss
Meanwhile, the Senate has indicated its intention to wade into the VAT controversy by summoning the minister of Finance, Hajia Zainab Ahmed and the chairman of the Federal Inland Revenue Service (FIRS), Babatunde Fowler to explain the reasons for the proposed increase.
Reacting to the development yesterday, Senator Solomon Adeola (APC, Lagos West), who is the chairman of the Senate Committee on Finance, said that the proposed increase in VAT had generated mixed reactions among the general populace on its possible effects on living standard and the economy.
Adeola said: “We are glad that the minister of finance indicated that the VAT Act will have to be amended for the increase to take effect. But we are concerned about the current economic situation of the country as it affects the generality of the people.”
He said that the Senate Committee on Finance interaction with the two key officials would form part of the basis for possible amendment of the VAT Act and to assuage any sentiments against the proposed VAT increase if eventually the Act is amended.
We Have No Intention Of Inflicting Hardship On Nigerians – PMB
Coincidentally, President Buhari has said that the federal government has no intention of inflicting hardship on Nigerians, but rather seeking ways to ameliorate their suffering and create more enabling environment for them to thrive.
Buhari stated this yesterday when he received the new executive of the Trade Union Congress (TUC), led by its president, Mr Quadri Olaleye, at the State House, Abuja.
While reacting to Olaleye’s presentation on national issues, Buhari said: “On fuel prices, I agree with you on the need to eliminate corruption and inefficiencies in the sector. I want to assure you that as an administration, we have no intention of inflicting any additional hardship on Nigerians.“
The president said that the federal government remains committed to the implementation of the national minimum wage, adding that the inaugural FEC meeting held on Wednesday, focused on the Medium-Term Expenditure Framework which includes discussions around the new minimum wage.
He said: “During our first term, we secured the nation’s territorial integrity and continued to protect the lives and properties of our citizens. We introduced various economic stimulus packages that support businesses and traders at all levels, promoted backward integration programmes, especially in the agricultural sector to enhance our food security while creating jobs.
“We embarked on the most ambitious infrastructure development and rehabilitation projects this country has seen in decades. We also introduced the largest Social Investment Programme (SIP) in sub-Saharan Africa.
“Although these programmes and many more, successfully lifted Nigeria out of recession, the full impact is yet to be felt. In the next four years, we shall sustain this momentum and by the grace of God, lift millions of Nigerians out of poverty,’’ Buhari said.
The president, who noted that his administration would work hard to improve the livelihood of citizens, said most of the inherited challenges were avoidable, if some previous governments had been keener on investing in infrastructure and human capacity.
“The points you raised are all interconnected. The lack of power and infrastructure due to decades of under-investment led to the closure or inefficient operations of a number of factories across the country. This meant the private sector was unable to create jobs, fast enough to cope with our increasing population.
“You will agree with me that all these challenges and many more were long ago left unattended to thereby leaving the country in the mired state we inherited. You all will also testify to having seen and experienced what we have put in place as an administration to address these challenges,’’ he said.
Earlier, Olaleye advised the government to pay more attention to the welfare of Nigerians by avoiding increase in fuel price and ensuring the implementation of the national minimum wage.
“We are, however, disturbed that the enthusiasm is turning into a nightmare,“ the TUC leader said.
He urged the president to focus on poverty reduction and improving security.
Olaleye assured the president that TUC would support the government as it tackled challenges facing the country.
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