- FG Urged to Raise VAT to 7%
If the country is to reduce unemployment and stimulate economic growth, the federal government has been advised to take bold steps which includes raising the Value Added Tax (VAT).
Proshare, an online financial information service hub, stated this in a report titled: ‘Proshare Confidential,’ obtained yesterday.
While the report stressed that in times of slow growth, economists would typically not prescribe raising taxes, it stated that since Nigeria currently has the lowest VAT in West Africa at five per cent, the government could be bold to increase the tax by at least 200 basis points, pushing the rate up by two per cent.
It noted that if this is implemented, the government should therefore concentrate the additional revenue in infrastructural developments that helps to drop the cost of doing business and citizen transactions to create headroom for consumption which would spur business growth.
This, over a period of 36 months, it stated, could reduce the cost of distribution of goods and services, thereby resulting in massive savings in logistics costs which could turn up as major improvements in corporate bottom lines and additional tax income; successfully closing the revenue-expenditure gap.
“It’s all about productivity enhancement and not hand-outs to the most vulnerable in the society the way it is done.
“You protect the most vulnerable by establishing public safety nets such as unemployment benefits, health services, state subsidised housing etc – all of which has to be paid for from the increase in productivity (translating to tax revenues), plugging of leakages through system/process improvements and adjusting the fiscal regime of taxes of tariffs to spur growth in the short term which will be clawed back to attain near equilibrium (illusory to get an optimum) as progress is attained,” the report stated.
In its review of 2019, it described the year as a “watershed for several countries across Africa as they enter election cycles that could make or mar their future.”
It pointed out that in Nigeria, the battle for the country’s political and economic soul has become vicious with every arm of government easy fodder for political henchmen determined to keep their paymasters, godfathers and muppets in the business of governance.
Unfortunately, this it stated meant that Nigeria’s 2019 federal fiscal plan would be more of a concession to tradition rather than a programme of action to building a resilient economy that can sustain a population growth of 2.9 per cent per annum.
It also faulted the federal government’s 2019 Appropriation Bill.