Nigeria

Labour, OPS slam senate, federal government over finance bill

President of the Senate, Ahmad Ibrahim Lawan (left) with the Senate Minority Whip, Senator Philip Tanimu Aduda, during the plenary on Tuesday, November 19, 2019. 5

Nigeria’s Senate decision to approve 56 amendments in Finance Bill, an executive bill submitted by President Muhammadu Buhari, seeking an approval to raise tax rates payable by consumers and business entities to augment Federal Government’s declining cashflow, last week opened another pandora box of debate as to the fate of ordinary citizens when it eventually gets signed into law by the president in the days and weeks ahead.

The bill titled ‘Nigeria Tax and Fiscal Law (Amendment) Bill (Finance Bill) 2019’, which seeks to increase Value Added Tax (VAT) payable by Nigerians from 5 to 7.5 percent also amended other Tax Acts including the Company Income Tax, Personal Income Tax, Custom and Excise Tax, Stamp Duties Act and the Capital Gains Tax.

In passing the controversial bill, the Senate leadership had argued that, “The Tax amendments would provide additional revenue for the government to provide services and infrastructure to Nigerian citizens. What we have done is very significant because this is to ensure that we not only have sources of funding very credible and of course reliable sources of funding for the 2020 budget, but also for subsequent activities of government. The revenue agencies have to sit up and the National Assembly would be mounting a lot of oversight on revenue generating agencies to meet their targets,” the Senate President Ahmed Lawan, remarked

But in a swift reaction, Nigeria’s Labour movement and members of the Organised Private Sector (OPS), warned that the Finance Bill passed by the Senate to increase VAT, Excise Duty, Stamp Duty and others will definitely hurt businesses and further impoverish the citizens who are already in pains of current harsh economic environment.

They equally described it as sign of bad governance that is totally unjust and unacceptable to the vast majority of Nigerians.

For instance, Regional President of IndustriALL Global and General Secretary of the National Union of Textile Garments and Tailoring Workers of Nigeria (NUTGTWN), Mr Issa Aremu, said the increase was rather unjust especially on poor Nigerians and the workers who have been at the receiving end of galloping inflation and other economic challenges.

“It’s unfair to impose indiscriminate taxes on poor Nigerians, even when the Minimum Wage recently increased for workers is yet to be implemented. It’s uncalled for to have additional taxes imposed on the poor Nigerians,” he said.

Aremu who is also a National Executive Council (NEC) member of the Nigeria Labour Congress (NLC) said it amounts to taking away whatever succour the Federal Government has offered the workers by way of salary increase, leaving them to their own fate contrary to what President Muhammadu Buhari promised them during his recent electioneering campaigns

He said it’s uncalled for and would be counter- productive in the long run to have additional tax burden imposed on businesses, after Nigeria’s recent elevation on the Ease of Doing Business of the World Bank.

Aremu said, “Government should rather impose more on property tax, right now the Customs are doing well with the border closure. But unfortunately now in Nigeria, only the poor pay tax, although government can get more revenue by bringing into the tax net all those companies that are not paying taxes at the moment.”

The Labour leader said President Muhammadu Buhari has done quite well in relation to his engagement in some issues on the economy, but urged him to engage more with relevant stakeholders before going ahead with implementation of the Finance Bill.

“Government needs to suspend this decision to have more robust engagement with Labour and members of the OPS,” he stressed.

He added that though government needs to get more funds to run the machinery of state, it must not be on workers who are struggling under the harsh realities of the present economy, warning it may lead to lower productivity on the part of workers.

Speaking from the side of Organised Private Sector, the Nigeria Employers Consultative Association (NECA) said the Senate passage of the Finance Bill came as a rude shock to the generality of Nigerians that the “people’s senate” without due process of going through memoranda submitted and even when those comments were still pouring in, passed the Finance Bill to increase VAT , excise duty , and stamp duty.

Director General of NECA, Timothy Olawale, lamented that Nigerians by implication are now to pay more for goods and services produced in the country since manufacturers would pass the burden of the increase on the final consumers.

He said, “Government especially the National Assembly has condemned the citizenry to a life of servitude to fuel their appetite for easy and luxurious life style.

“The National Assembly is by implication asking Nigerians that are already passing through tough times economically to prepare for more harrowing experiences with their highly eroded purchasing power arising from spiraling inflation.”

Based on the Senate decision, the NECA boss said it was unfortunate that government’s idea of wealth creation is not pro- masses, but to add to the poor masses’ burdens with more levies and taxes.

He noted that the only window left for Nigerians was to hope that the pro-people disposition of president Buhari will rise in defense of the people by declining assent to the bill, which NECA boss believes may be a tall order since the Bill emanated from the Presidency in the first instance.

But for businesses operating in the country, Olawale said this may be the most challenging episode in their lives as they would be adversely impacted when the shelf life and inventories of goods in their warehouses begin to skyrocket with rising prices of goods and more price burden passed to consumers. He said the new bill would further worsen Nigeria’s inclement business environment where enterprises are fighting for survival and to keep jobs of Nigerian employees.

In the same vein, the Lagos Chamber of Commerce and Industry (LCCI) warned that the upward review of VAT at this time will hurt businesses, the economy and citizens.

Director General of the Chamber, Muda Yusuf, said many businesses are currently grappling with high production and operating costs which has made sustainability difficult for organisations, due to the pressure of costs driven by high interest rate, huge logistics cost, high energy cost, and high regulatory compliance costs.

According to him, businesses often have difficulties in passing these additional costs to customers because of the weak purchasing power of the citizens.

“We had advocated that rather than increase tax rates, the government should broaden the tax base by bringing numerous persons and enterprises that are not tax compliant into the tax net. Meanwhile, for an economy contending with high unemployment, we should be talking about economic and fiscal stimulus at this time, not an additional burden of tax,” he said.

The LCCI Director General advised that it was important for government to address issues of the cost of governance in order to ensure its fiscal sustainability.

He said, “The recurrent expenditure of government is too high, cost of governance is humongous. There is need to prune both overheads and personnel costs. The reform of the oil and gas sector would also boost revenue through the attraction of new investments.” The Chamber boss said

But in his contribution, a development economist, Mr Odilim Enwegbara, said: “In 2018 South Africa made from VAT receipts $25billion while Nigeria only made N1.1trillion ($3.4bn). This is notwithstanding the fact that Nigeria’s economy is bigger than South Africa’s economy. The reasons are obvious. First, South Africa’s VAT rate is 15 per cent. Nigeria’s is 5per cent. Second, South Africa has one of the best advanced VAT collection and remittance technologies in the world. Nigeria’s manual process is so high that as much as 75 per cent of its VAT are either not collected or collected but not remitted.

So, I’m of the opinion that we can’t run a modern economy without government generating enough tax revenue to meet its budgetary spending especially its capital requirements.

For this transition to be made, I’m of the opinion that we must all accept this inevitable truth we face in accepting to pay higher taxes than we have so far paid.

Having allowed borrowing addiction to be our only source of meeting government’s annual budgets, it is now time for government to mitigate from borrowing expensively to depending on tax receipts. But in an effort to achieve that, I recently proposed to government the technology that can help it to fully block all the leakages in VAT receipts. The submitted technology is called the Easyvat Technology. This was sent to the Buhari administration through one of his ministers.

The good news here is that with Easyvat Technology Nigeria will not just begin to adopt technology in its VAT collection and remittance, but will be able to ensure that VAT evaders are permanently blocked.

Besides, with Easyvat, product piracy, and smuggled cheap and harmful products can hardly make it into our National Product Inventory. This is because Easyvat Technology being 100per cent e-payment, makes it extremely difficult for goods and services that are not from the National Product Inventory to be sold to Nigerian consumers.

This is also because the approving Knob Sensor Technology which is built-in will first ascertain the authenticity and quality of the product and its source in order to know whether the product has gone through the national scanning and tagging processes that are required in order to have made it into the National Product Inventory database. But there is one concern I have always had. It is how government will be sharing the VAT money in a way that does not encourage VAT compliance? It is unfair for federal government to generate VAT revenue from some particular parts of the country and then shares it across board among the 36 states of Nigeria.

If government wants to increase its VAT receipts it must come up with a policy that allows the states where VAT money is generated to keep at least 50% of it and then federal government can go ahead to share the remaining 50 per cent using its present sharing formula” .

Also support the move for government to raise taxes to improve infrastructure in the country, Mr Johnson Chukwu, the Chief Executive of Cowry Assets said “I do not think the impact of the increase will be material in terms of revenue to the government. For instance, last year, the Federal Government’s total income from VAT was N147 billion and if they doubled that as a result of the increase in VAT, they will get about N73.5 billon additional income and I do not think that will make material difference in its revenue, same with other taxes that would be increased. But we have to take into perspective that Nigeria has the least VAT rate in the world and the challenge we have is not that the VAT rate has been increased, but the level of consumer spending is declining, disposable income is declining and in terms of consumption, we are seeing depleting levels. So, anything that increases the level of goods and services will further dampen consumption. A dampened consumption will lead to lower level of production or productive activities and so this may have unintended negative macro- economic effect especially at the time of this increase. Ideally, one would support the increase in VAT, but the timing is questionable because we are dealing with depressed consumer demand and one would not want to worsen that by imposing taxes on consumption.

Meanwhile, a human rights activist and the lead director of Centre for Social Justice (CSJ), Mr Eze Onyekpere, said: “The Finance Bill, recently passed by the Senate will be harmonised with the position of the House of Representatives before getting presidential assent to become law. Yes, it may mean that Nigerians and residents in Nigeria may have to pay more taxes and part with more of their hard-earned resources to government.

But governments all over the world are ideally run on taxes. The issue raised by opponents of the bill about the provisions being a disincentive to investments holds no water. Nigeria has over the years given all sorts of costly incentives to investors which denied the government of billions of dollars in revenue, but this did not attract any ground-breaking investments.

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