NECA cautions state governments on VAT increase

Timothy Olawale - Nigeria Employers’ Consultative Association (NECA)

Against the backdrop of President Muhammadu Buhari’s advice to state governments to increase Value Added Tax (VAT) in an attempt to increase their revenue, the organised private sector (OPS) has tasked the states to enlighten the masses.

The Nigeria Employers Consultative Association (NECA) advised the state governments to engage in an aggressive taxpayer enlightenment as well as expansion of their tax net to increase their internally-generated revenue (IGR).

NECA said that increasing VAT this time to increase IGR was not only misplaced but would further impoverish citizens that Buhari promised to take out of poverty as well as do more harm to the already burdened private sector.

NECA’s director-general, Timothy Olawale, who stated this at the International Labour Conference (ILC) in Geneva, Switzerland, said the President meant well by urging state governments to be innovative in increasing their IGR, and at the same time prudent in their expenditures; he also argued that state governments could not unilaterally increase VAT without the amendment of the VAT Act at the National Assembly.

According to him, it was the common man that will definitely be at the receiving end of any increase in VAT.

He said, “Even if businesses are taxed more through likely illegal levies and rates outside the provisions of the law, they will naturally pass the cost to the customers whose purchasing power is already at the lowest ebb,” he said.

Proposing a way out, Olawale said both federal and state government must engage in aggressive taxpayer enlightenment and expansion of the tax net to capture more citizens, stating that less than 40 per cent of Nigerians are tax-compliant.

He suggested that the states should put mechanisms in place to eliminate leakages, as a large chunk of the IGR realised does not get into government coffers.

Olawale advised governors on reduction on cost of governance, while several unnecessary retinues of aides kept by them at prohibitive cost to the State are needless.

“Besides, ingenious idea of corrupt practices in the name of security votes and frivolous foreign travels by State government functionaries are veritable examples of cuttings in avoidable expenses draining state government purses.”

He stated: “The president meant well by urging state governments to increase their Internally Generated Revenue (IGR). Considering the reported over N2 trillion in bail-out funds to many of the states, it was apt for the president to advise them to be innovative in increasing their IGR and at the same time prudent in their expenditures.

“However, the call for increase in VAT or any other form of tax as a way to increase IGR at this time is not only misplaced, it will do more harm to the already burdened private sector and further impoverished citizens that the President promised to take out of poverty.”

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