By Omoh Gabriel & Clifford Ndujihe

LAGOS — The Federal  Inland Revenue Services, FIRS, weekend, said the Federal Government is considering a review of Value Added Tax, VAT, with a possible increase from five per cent to 10 per cent.

It also stated that government would take a drastic measure to stop tax evasion as there are moves to capture the revenue flow of companies and individuals to make it difficult for anybody resident in Nigeria to operate an account without Tax Identification Number (TIN).

Chairman of the FIRS, Mr. Sunday Ogungbesan, who disclosed this, said: “Federal Government would soon take a decision on the VAT system after engaging with stakeholders  on the need to increase it in order to make up for the shortfall in crude oil revenue. The plan is to increase to 10 percent this year but we have to consult first with relevant stakeholders.”

VAT is a tax on spending. The tax is borne by the final consumer of goods and services because it is included in the price paid.

It’ll worsen poverty level in Nigeria

—Expert

Commenting on the issue, a public affairs analyst, Chris Udoh M’Enin, advised the Federal Government to drop the proposed idea of increasing VAT.

Cautioning the government against poorly conceived ideas,  M’Enin asked the governments to tell Nigerians the value they have given to the people with the five per cent they are already receiving.

His words: “Original design of VAT was to be input-output tax whereby the business collects VAT for vatable services it offers (output) and pays VAT for vatable services it receives (input). At the end of the day, the business was supposed to deduct what it pays out from what it collected as VAT and hands the difference to government. But today, both the input and output VATs go to government, thereby heaping more burden on the consumers.

“Technically, the government is using VAT to forcefully reduce the quantity and quality of food that the masses put on their tables everyday because whatever VAT a service provider pays is automatically passed on to the consumers in the form of increased prices.

“For instance, Mr Jonathan earns N20,000 per month. A basin of garri is N5,000. With 10 per cent VAT, his garri becomes N5,500 a basin. Mr Jonathan will have no other option except to reduce the quantity of gari that he consumes or reduce the quantities of goods and services his remaining N15,000 could buy. Note also that he would need N16,500 to satisfy his original N15,000 consumption.

“Therefore, with his fixed income at N20,000, the consumer would need N22,000 to maintain the same level of consumption that he had. But because his income is fixed at N20,000, he needs to reduce his consumption by about N4000 to meet up.

“My suggestion is that FIRS/government should forget about any tax increase for now but should implement policies to increase the production base and employment so that unit consumption can increase and by extension increase total VAT and payee taxes.

“If you have y consumption units bring in Nx VAT at five per cent, you can use production/employment to increase consumption units to 2y and earn 2Nx at the same five per cent VAT. Government should not look for quick and easy ways of making money because they hurt the masses. They should be creative and strategic in their thinking and actions.”

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