By HEADLINENEWS.NEWS correspondent
The Presidential Committee on Fiscal Policy and Tax Reforms has said there is a need to increase the value-added tax (VAT) rate.
He spoke at a policy exposure and impact assessment session organised by the committee.
Nigeria’s VAT rate is currently 7.5 percent.
Oyedele also said the committee has proposed reviewing state and local governments’ share of VAT revenue to 90 percent.
According to section 40 of the VAT Act, the federal government gets 15 percent of the tax revenue, states share 50 percent, and local governments share the balance of 35 percent.
However, Oyedele said the committee is recommending reducing the federal government’s share from 15 percent to 10 percent.
“We are proposing that the federal government’s portion should be reduced from 15 percent to 10 percent. States’ portion will be increased but they would share 90 percent with local governments,” he said.
Oyedele said the committee proposed adjusting the sharing formula for VAT because it is a tax of the states.
“In 1986, we had sales tax collected by states. The military came up with VAT in 1993 and stopped sales tax so they said it would collect VAT and return 15 per cent as cost of collection and that is the 15 per cent charged today came about. But we think it is too much,” he said.
The tax expert added that the burden of VAT should be on the ultimate consumer.
So we must make it transparent and neutral and this is what over 100 countries where they have VAT are doing,” Oyedele said.
“Nigeria’s economy is more than 50 percent in services and if I just stop at this, many states will be broke because VAT collection will go down by more than 50 percent and it won’t even fly.
“So we therefore need to adjust the VAT rate upward. We would ensure that it doesn’t affect businesses. The only thing is to look at basic consumption from food, education, medical services and accommodation will carry zero percent VAT. So for the poor and small businesses, no VAT.”
Oyedele said other consumers will pay a bit more.
“We have spoken to businesses about it and they won’t increase the product price. We want to make sure when we do VAT reform, no one will increase the price of commodities. We will work the mathematics with the private sector,” he said.
Oyedele also said each state should not be granted exclusive custodianship of their collections– because it would likely result in chaos.
This comes barely two days after the Central Bank of Nigeria (CBN) issued a circular to all commercial, merchant, non-interest, and payment service charge 0.5 per cent cybersecurity levy on all bank transactions from Monday, May 6, 2024.
The circular stated partly, “The levy shall be applied at the point of electronic transfer origination, then deducted and remitted by the financial institution. The deducted amount shall be reflected in the customer’s account with the narration, ‘Cybersecurity Levy.”
It’s worth noting that the levy will be paid by the originator of the electronic transaction and deducted by the financial institution. The deducted amount shall be reflected in the customer’s account with the narration, “Cybersecurity Levy.”
However, the development sparked mixed reactions, with depositors saying the development was scathing, just as experts have weighed in on the implications.
Reacting to the developments, customers and economic experts questioned the timing of the directive while adding that the levy is uncalled for.
Chijindu Happiness, a bank customer while expressing her frustration, said, “In other nations, the NSA is a revered agency but here in Nigeria, it just looks like it is just there for decoration. What is their role again? How effective is the Nigeria Computer Emergency Response Team? It is simple, this is their main role and so I ask how is it the citizens’ problem to curb cybercrime through this supposed levy? Very soon, we will be tasked to fund the national budget”.
An ICT expert, Chief Ajiji, via his X handle, said, “For every N1,000 interbank transfer, cyber security will collect N5, telecoms will collect N4 for SMS, NIBSS will collect N10, COT will collect N1 and then stamp duty at N5 will be charged by FG, making it a total cost of N25 (2.5 per cent processing fee for every N1,000). This is insensitive and should be reversed immediately. Whatever happened to the recovered loots? Why can’t the recovered loots be used to run this? This is totally strangulating and a daylight robbery on the masses.
For his part, Professor of Finance and Capital Market, Uche Uwaleke, said the levy is ill-timed and carries the downside risk of discouraging financial inclusion, adding that the circular be withdraw forthwith.
