The Federal Government on Tuesday revealed its plan to increase the Value Added Tax (VAT) up to 50 percent.
This is even as the upper chamber of the National Assembly approved N30, 000 as new minimum wage.
The planned upward review of the Value Added Tax up to 50 percent was disclosed by the Minister of Budget and National Planning, Senator Udo Udoma, and the Chairman of the Federal Inland Revenue Service, Babatunde Fowler, in Abuja when they appeared before the Senate Committee on Finance.
The duo, who was in the Senate to explain details of the 2019-2021 Medium-Term Expenditure Framework and Fiscal Strategy Paper expected to be the benchmark for the 2019 budget deliberations, added that the increment in VAT would enable the Federal Government fund the new national minimum wage.
Fowler further explained that the proposed payable VAT by Nigerians, based on the increment, would actually be between 35 percent (6.75%) and 50 percent (7.25%).
The government is currently charging five percent VAT on all products in the country.
Fowler said the FIRS’s goal was to achieve an N8 trillion revenue generation target this year.
He said: “By the end of this year, we should be ready for an increase in the VAT.
“A lot of Nigerians travel to Ghana and other West African countries and they can see that theirs is much higher.
“They pay when they go for those trips. We should be ready for an increase on VAT.
“I can certainly see an increase in VAT of at least 35 percent to 50 percent this year, based on our enforcement activities.
“There certainly will be an increase in Company Income Tax and also on Petroleum Profit Tax.”
Explaining the agency’s method of collecting tax, FIRS boss said his agency had collated details of 34 million Nigerians that are captured in the BVN network with a view to assessing their compliance to the tax laws.
Enumerating what the agency had raked in in the past, Fowler said FIRS raked in N3.1 trillion in 2016, N4.03 trillion in 2017 and N5.32 trillion in 2018, even as he expressed the hope it would surpass past records in 2019.
He said: “Nigerians should be ready for an increase in the VAT with at least by 35 percent this year. Nigerians travel to other countries and they pay more on tax.”
Disclosing that the Technical Advisory Committee on the Minimum Wage will submit its report to President Muhammadu Buhari this week, Udoma said: “It will be recalled that as a result of agitations from the unions, the president set up a tripartite committee to look at the Minimum Wage.
“Every five years, it is supposed to be reviewed. It has not been reviewed even though there is no doubt that for both the Federal Government and states it is a tough time to review wages. But the N18, 000 is really too low and it is difficult for people to live on N18, 000.
“The president supported a revision but it is important that as we are revising (the Minimum Wage), we make sure that it can be funded, that is why we set up the Bismark Rewane Technical Committee.
“We will be coming to you. There may be some changes maybe in VAT and other things, but we will be coming to you in order to make sure that we can fund the Minimum Wage.
“So, it is something we are going to work closely with the Finance Committee on how best this Minimum Wage will be addressed, both from the Federal Government and the states to ensure that the whole government apparatus is not just paying salaries and nothing else.
“It is important that we are able to pay the Minimum Wage and still have enough resources to do infrastructure. The committee has virtually completed its work.”
Explaining part of the efforts to generate revenue for the Federal Government, Udoma said the government would intensify efforts in its assets recovery drive and would also challenge revenue generation agencies like the FIRS and the Nigeria Customs Service to boost their operations.
Udoma justified the benchmark recommended by the executive in the fiscal document and expressed confidence that necessary strategies were being employed to make them realisable.
The Federal Executive Council had, in October last year, approved the MTEF/FSP and also proposed N8.73 trillion for the 2019 budget, which is N400 billion lower than that of 2019, which is N9.12 trillion.
Reviewing the performance of the 2018 budget, the Director General of the Budget Office, Ben Akabueze, said the budget had achieved appreciable performance.