The Minister of Budget and National Planning, Senator Udo Udoma, on Tuesday appeared before the Senate Committee on Finance and hinted that the Federal Government was considering, among others, an upward review of the Value Added Tax (VAT) to enable it to fund the new national minimum wage.
Senator Udo Udoma and the Chairman of the Federal Inland Revenue Service (FIRS) Mr. Babatunde Fowler, disclosed this on Tuesday.
Fowler said the proposed payable VAT by Nigerians based on the increment from the current five per cent would actually be between 35 per cent (6.75%) and 50 per cent (7.25%)
“By the end of this year, we should be ready for an increase in 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,” Fowler said
Fowler said the agency had increased VAT collection by 25 per cent in the last three years, but lamented that many of the firms that are collecting VAT are not remitting it.
“It would 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), and we will 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 may be in VAT and other things. But we will be coming to you in order to make sure that we can fund the Minimum Wage,’’ Udoma said.
But reacting on the proposed VAT hike, Managing Director and Chief Executive Officer (CEO) of Financial Derivatives Limited, Mr. Bismark Rewane, said the comments by the duo of Udoma and Fowler remained their opinions.
Rewane said not until a white paper on the N30,000 minimum wage all submissions on the workable framework towards the implementation of the minimum wage still remains in the realm of speculations.
‘‘I cannot comment on a report that has not been submitted. But I think that is just the opinion of the Minister. Not until the report is out and a white paper issues, nobody can say this is the direction VAT review will take.” He, however pointed out that Nigeria’s tax to GDP ratio is very low, adding that for now, he does not know which tax the country would be more efficient in collecting; admitting that discussions around Nigeria’s tax system must be looked at closely.