The Federal Government, Tuesday, said it was considering 50% increase in Value Added Tax (VAT) to be able to pay the new national minimum wage currently being processed by the National Assembly.
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.
In his statement, Fowler said that the proposed payable VAT by Nigerians based on the increment would be between 35 per cent (6.75%) and 50 per cent (7.25%). But government is currently charging 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 in 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.
His words: “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.”
“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.
It would be recalled 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 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.
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.