FG plans 50% VAT hike to fund new minimum wage
BY FRANCIS EZEM
The Federal Government, Tuesday, said it was considering 50 per cent increase in the Value Added Tax VAT to enable it pay the new national minimum wage currently being processed by the National Assembly.
This is sequel to the passage of the New National Minimum Wage Bill by the Senate, the nation’s upper legislative chamber, having been passed earlier by the House of Representatives, which pegged the wage at N30, 000 per month.
Minister of Budget and National Planning, Senator Udoma Udo Udoma, and Chairman of the Federal Inland Revenue Service, Mr. Babatunde Fowler, disclosed this when they appeared before the Senate Committee on Finance.
Fowler in his statement, told the legislators that the proposed payable VAT by Nigerians based on the increment would be between 35 per cent (6.75 per cent) and 50 per cent (7.25 per cent), as against the current charge of five per cent VAT on all products in the country.
Also, the two public officers came with other heads of the Federal Government revenue generating agencies, who were at the Senate to explain details of the 2019-2021 Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).
It was gathered that the documents are to act as a guide as well as the benchmark for the 2019 estimates, which is being worked on for passage by the National Assembly.
Fowler said that the goal of the FIRS was to achieve an N8trn revenue generation target this year, pointing out that the 50 per cent increment would affect the Company Income Tax and the Petroleum Profit Tax.
He said: “By the end of this year, we should be ready for an increase in the VAT. A lot of Nigerians travel to Ghana and other West African countries and they can see that theirs is much higher. They pay when they go for those trips. We should be ready for an increase on VAT.
“I can certainly see an increase in VAT of at least 35 per cent to 50 per cent this year based on our enforcement activities. There certainly will be an increase in Company Income Tax and also on Petroleum Profit Tax.”
He further affirmed that the agency had collated details of 34 million Nigerians that were captured in the BVN network with a view to assessing their compliance to the tax laws.
It was also hinted that FIRS raked in N3.1trn in 2016, N4.03 in 2017 and N5.32tn in 2018, expressing optimism that it would surpass these past records in 2019.
But Fowler noted that the agency had increased VAT collection by 25 per cent in the last three years and, lamented that many of the firms that are collecting VAT were not remitting it.
“Nigerians should be ready for an increase in the VAT with at least by 35 to 50 per cent this year. Nigerians travel to other countries and they pay more on tax”, he said.
Meanwhile, the Minister of National Planning while speaking at the meeting, told the committee, headed by Senator John Owan-Enoh, that the Technical Advisory Committee on the minimum wage, would submit its report to President Muhammadu Buhari before the end of this week.
“It will be recalled that as a result of agitations from the unions that the President set up a tripartite committee to look at the Minimum Wage. Every five years, it is supposed to be reviewed. It has not been reviewed even though there is no doubt that for both the Federal Government and states; it is a tough time to review wages. But the N18, 000 is really too low and it is difficult for people to live on N18, 000.
“The President supported a revision but it is important that as we are revising (the Minimum Wage), we make sure that it can be funded that is why we set up the Bismark Rewane Technical Committee. We will be coming to you. There may be some changes maybe in VAT and other things. But we will be coming to you in order to make sure that we can fund the Minimum Wage.
“So it is something we are going to work closely with the Finance Committee on how best this Minimum Wage will be addressed, both from the Federal Government and the states to ensure that the whole government apparatus is not just paying salaries and nothing else.
“It is important that we are able to pay the Minimum Wage and still have enough resources to do infrastructure. The Committee has virtually completed its work”, Udoma stated.
He added that the Federal Government would intensify efforts in its assets recovery drive and would also challenge revenue generation agencies like the FIRS and the Nigeria Customs Service to boost their operations.
The Minister added that efforts were being made by the All Progressives Congress (APC)-led government to ensure that capital projects and other sectors of the economy were adequately funded.
He gave justification for the benchmark recommended by the executive in the MTEF and FSP documents, expressing confidence that necessary strategies were being put in place to make them achievable.
The Minister said that the expenditure component of the 2019 budget proposal in the MTEF/FSP was lower compared to the projection in the actual budget because of the hike in the police salaries that was later accommodated after the document had been submitted.
The Director General of the Budget Office, Ben Akabueze, while reviewing the performance of the 2018 budget, noted that it had achieved appreciable performance.
He, however, said that no specific revenue had been channeled to the Social Intervention Programme apart from the looted funds being recovered especially the popular ‘Abacha loot’.
According to him, provisions have been made in the 2019 budget to allocate adequate funds to the Bank of Industry, with a view to giving out loans to small scale industrialists especially in the agro-allied sector to boost their productivity.
The Chairman of the Senate Committee on Finance, Owan-Enoh, stated that details of the Senate version of the MTEF/FSP, based on the interactions with the officials, would soon be made public.
Recall that the Federal Executive Council had in October last year, approved the MTEF/FSP as well as proposed N8.73 trillion for the 2019 budget, which is N400bn lower than N9.12 trillion being the 2018 budget.
The Federal Government had also in the fiscal document, proposed an oil price benchmark of $60; oil production of 2.3 million barrels per day; exchange rate of N305 per US dollars; and Gross Domestic Product growth rate of 3.01 per cent.