The planned increase of the Value Added Tax (VAT) on products, including food items from five per cent to 10 per cent is yet another indication of the Nigerian government’s predilection for churning out ill-conceived and anti-people’s policies. Clearly, VAT is a veritable source of revenues for nations all over the world and an increase in VAT that is limited to certain goods makes economic sense.
But the fact that the government’s current conception of VAT would affect food products has detracted from the purpose of enhancing the people’s welfare that it intends to achieve. To that extent, any move by the government to increase the burden of the ordinary Nigerians who have already been impoverished by churlish economic policies and programmes must be shelved on account of the insensitivity of such.
The Federal Government apparently resorted to increase in VAT as part of the austerity measures to cushion the adverse effects of fiscal crunch resulting from the fall in the global prices of oil. But the government should stick to only the aspect that involves increasing VAT on luxury products and not essential items like food. Any failure of government to reckon with the baleful effects of increase in prices of food products would betray its incapacity to think through policies before announcing them to the public.
The current posture of the government negates the original intent of the policy of VAT. For under Decree No. 102 of August, 1993, certain goods and services have been exempted from the purview of value added taxation. All exported goods, medical and pharmaceutical products, products meant for kids, basic food items, commercial vehicles and their spare parts, books and other educational materials, fertilisers, farming machines, agricultural products, farming transportation equipment and veterinary medicines and magazines and newspapers are meant to be exempted from VAT.
The exempted goods also include plays and performances that are run by educational institutions for educational purposes and services that are provided by community banks, mortgage organisations and people’s banks.
The Federal Government enacted the VAT Amendment Act in 2007, empowering it to fix the rate of value added taxes to be imposed in Nigeria. Hence, the current plan to increase to 10 per cent, one which has appropriately generated criticism from manufacturers. As a robust source of funds to the Federal Government, the revenues earned from value added taxes in the country in 1994 exceeded projections. It contributed about four per cent of the total revenue realized by the Federal Government in that year. In 1995, the rate of contribution was 5.39 per cent and the rate has been growing since.
However, it is the ordinary Nigerians who have borne the brunt of the failure of government’s economic policies who would be worst hit by increase in the prices of food products should VAT be increased. Well-heeled Nigerians with easy money, mostly looted from the public treasury have ways of making themselves immune to the negative consequences of such a policy.
As the Group Managing Director of Flour Mills of Nigeria and President Association of Food, Beverage and Tobacco Employers (AFBTE), Paul Gbadebo, warned recently, an increase in VAT on food products would translate to increase in their prices. Since the prices of food items which are already high would now go higher, the people would not be able to afford these items. The overall consequence is that they would be afflicted by malnutrition. Already, because of the harsh economy, most Nigerians cannot afford food and beverage products like biscuits, confectionery, water and carbonated drinks which are basic food items that should be within the reach of the people.
Over the years, governments have failed to tame the incubus of unemployment of the teeming youths. An increase in VAT on food prices would definitely worsen the job crisis. This is because the policy would, therefore, send many manufacturers out of business as the prices of their food products go up and the number of those to buy them is considerably depleted. What manufacturers need now are adequate incentives that would propel them into expanding their businesses that could pave the way for the employment of more people.
More importantly, the policy of VAT has triggered the recurrent question of what value it is really adding to the life of the average Nigerian. The government generates revenues from VAT and other avenues but such money ends up being wasted through official profligacy. What the government should do now is to make policies and implement programmes that would make life more meaningful for the majority of Nigerians and not to increase their economic burden.
