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Tax increase will worsen poverty, inequality, TJGP cautions FG on VAT

A Coalition of Civil Society Organisations (CSOs), Friday warned that the increase in the Value Added Tax (VAT) by the Federal Government from five to 7.2 per cent would further increase inequality and exacerbate poverty in the country.

The six-member coalition under the aegis of Tax Justice and Governance Platform (TJGP) said that rather than increasing the VAT, deliberate pro-poor policies should be developed to protect the masses, which according to the group are more significant in the national population.

Members of the Non-Governmental Organisations include Christian Aid, Action Aid Nigeria, Centre for Democracy and Development, Civil Society Legislative Advocacy Centre, OXFAM Nigeria and Imo state Tax Justice and Governance Platform.

“As it has been demanded by many Nigerians and groups, we call on the federal government to pay serious attention to widening the tax net rather than increasing the rate which will only place more burden on the few that complies already and still exempt the majority that does not pay taxes,” it states in a statement.

“We want to state our position for advocacy and campaign which is that Government designs and implements policies and programmes that enhance the welfare of the poor and protects disadvantaged groups that constitute much of the Nigerian population and address issues of inequality.”

The Federal Government on Wednesday had announced at the Federal Executive Council (FEC) that it would increase tax as part of efforts to increase national revenue for developmental projects.

The Coalition further charged the Federal Government to consider some thematic issues such as; who bears the burden of the tax increment? What main drivers could justify the decision for a VAT increment? What are the real issues around VAT: Remittance (collection) or Rate? How well has the little been used and what are the assurances that an increase would alleviate economic conditions? What systematic measures have been taken to ensure tax compliance? Are there no other options available to the government to mobilize revenue?

Hence, it tasked the government to provide additional information and details on proposed measures for the purposes of public debate and multi‐stakeholder input.

It stated further the need for empirical projections and evidence-based expected outputs that could indicate that the tax yield from some of the measures would outweigh any disadvantage and potential negative impact and that the majority of Nigerians would be the ultimate beneficiaries of the proposed measures.

“These include reducing the tax incentives granted to multinationals which is not even much of a contributor to their existence in the Nigerian business environment. Consider full digitalization of the processes of tax administration to curb leakages in the system.

“Support the establishment of the beneficial ownership register in Nigeria as a measure to know people’s real worth and what they are liable to pay as tax.

“Fully implement the BVN policy as a measure of tracking peoples’ tax liabilities especially the high net worth individuals in the country who has been alleged of not paying taxes at all.”

The group, however, welcomed the VAIDS initiative as an opportunity to increase tax net, stressing that though, it is yet to yield the optimum result expected, “there are still myriads of companies and other taxable entities in Nigeria who are not in the tax net and still not convicted or punished in any way.”

It also advised the Federal Government to concentrate more on proper collection of appropriate tax from multinationals and large corporations accused of benefitting from ‘undeserved tax incentives and had for years engaged in tax avoidance practices”.

The TJGP Nigeria is a group of CSOs advocating for the promotion of a progressive, fair and transparent system in which domestic resources are effectively mobilized through an efficient tax system, utilized for people-oriented development and provision of essential services that benefit majority of citizens, including the poor and disadvantaged groups.

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