STAKEHOLDERS at the just concluded “Review of proposed VAT Reform” said the Presidential Committee in charge needs to provide clarity and detailed information on its proposal for proper public engagement and scrutiny.
They made their position known in a communique issued on Friday, September 20, following the just concluded VAT reform workshop held in Abuja.
The stakeholders that signed the communique include Nigeria Civil Service Union, National Association of Nigerian Traders, Nigerian Women Economic Development Project, Association of Women Business Network, Trade Network Initiative, Dataphyte, Good Governance Team, African Centre for Tax and Governance, Centre for Social Justice, Centre for Inclusive Social Development, African Leadership Strategy and Transparency Debt Initiative and CEO Advisory Limited.
They observed a lack of clarity in the proposal, resulting in a lack of information that Nigerians could engage with since no policy document could be referenced for public engagement.
The Committee had proposed 0 per cent VAT on food, education, and healthcare while exempting VAT on rent and transport in its proposal. They also increased the rate on non-essential items to partly offset the reduction on essential items. The stakeholders argued that some of the items on 0 per cent VAT were non-taxable initially making the proposal unclear, adding that non-essential items were not defined by the committee.
The committee also proposed to discontinue other consumption taxes and charge only VAT where applicable. The stakeholders also considered this statement from the proposal ambiguous, adding that it lacks clarity and could lead to arbitrary enforcement.
“While we acknowledge the participatory efforts by the Presidential Committee to draw citizen positions through a poll on social media platforms and expect more elaborate details on the proposals from the Committee, we would like to emphasize the right of every Nigerian to fully understand, question and relate to how these reforms can affect their daily lives,” the stakeholders said.
They also noted that given the limited information provided to the public for now, there are several unanswered questions about the Presidential Committee’s stance on VAT.
Commenting on the ambiguity of non-essential items posted on the committee’s website, they queried who determines what is classified considering regional differences and concerns in such classifications.
They also queried the compliance rate and collection efficiency under the existing VAT system which informs the prioritisation of an increase in VAT rate as opposed to enforcing compliance and improving efficiency of collection.
The committee also questioned the administrative framework which would be used for implementation which if not made public could lead to arbitrariness by enforcing implementing agencies.
“What administrative framework would be used for implementation, and what data supports the claim of 82 per cent exemption in the committee’s website,” they ask.
In making public their stance, the stakeholders reject the proposed VAT rate increase, stressing that it will make Nigerians poorer.
“Increasing the VAT rate on non-essential items in the current economic climate is unacceptable as the burden ultimately falls on low-income households who spend a larger share of their income on consumption.
They argued that the burden of the increment would be born by Nigerians who are currently without any form of social safety net.
In their recommendations, the stakeholders noted, “Rather than an increase in VAT rate, we urge the government to explore more equitable ways of raising tax revenues”.
They further advised the government on cutting unnecessary tax expenditures like reliefs and waivers given to multinationals, oil companies, and others which cause significant revenue loss without clear commensurate benefits to the country.
They suggested strengthening the collection of property taxes, raising VAT on luxury goods and services, targeting high net-worth individuals and strengthening compliance with income tax obligations considering that in 2023, Nigeria generated N12.37 trillion in personal income taxes from 41 million (18.76 per cent of population) taxpayers, compared to N88.29 trillion from only 24.8 million (41.4 per cent of population) taxpayers in South Africa in 2023.
They also added that strengthening tax administration through automation and the use of IT to plug leakages would improve Nigeria’s tax system rather than a VAT hike.
They suggested further that instead of blindly following the ECOWAS regional directive on VAT rate, the government should prioritise Nigeria’s unique economic situation and explore the alternative revenue sources mentioned above.
The ICIR reports that the Nigerian fiscal policy committee led by Taiwo Oyedele has proposed sweeping reforms to the country’s VAT system, including increases in VAT rates on certain goods and services to offset the removal of multiple consumption taxes currently imposed by various states.
These changes are aimed at simplifying Nigeria’s complex tax framework, enhancing business competitiveness, and promoting economic fairness.
The ICIR has also earlier reported that the Presidential Fiscal Policy and Tax Reforms Committee said it proposed a reduction of the multiple taxes paid to various levels of government to a single digit of eight taxes.
The tax reduction is part of the committee’s reform proposal to help lower the tax burdens placed on individuals, households, and businesses.
The committee’s chairman, Oyedele, discussed some of the changes at a public consultation workshop with journalists, analysts, and media experts on Thursday, May 30, in Lagos on the proposed changes to the National Fiscal Policy.
He said the committee was at the stage of concluding its policy formulation framework and submission of its proposals to the National Assembly and other regulatory authorities.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.