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RMAFC Canvasses Upward Review Of VAT To 10%

vat-1The Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) has called for an upward review of Value Added Tax (VAT) from five per cent to between 7.5 per cent and 10 per cent in order to improve the country’s revenue base. This is as the Federal Inland Revenue Service (FIRS) said the focus of the service this quarter, was to recoup taxes owed by airlines, banks and communication companies.

Also, the Federal Government said it had identified 1000 dormant revenue lines to be harnessed as additional sources of revenue opportunities. These were disclosures made yesterday in Kano at a two-day National Revenue Retreat organised by the Federal Ministry of Finance as part of government’s effort to brainstorm on how to shift emphasis from oil to non-oil revenue.

Speaking on strategies to expand the revenue base of the government and the new sources for revenue generation, RMAFC chairman, Mr. Shettima Gana, said that Nigeria’s current VAT rate of five per cent was low.

He explained that charge on goods and services in Nigeria was one of the lowest in the world. He said that in South Africa, VAT was 14 per cent while in Togo, Senegal, Guinea and Chad, it was 18 per cent, and Niger 19 per cent. He urged the Federal Government to start the process to increase it to between 7.5 per cent and 10 per cent.

The VAT is collected by the Federal Inland Revenue Service (FIRS) and shared to the three tiers of government. Federal Government receives 15 per cent, state governments 50 per cent and local governments 35 per cent. Gana said that VAT was a high tax revenue yielding instrument that could be used to shore-up revenue required for financing the ever-expanding public expenditure and the needs of all the tiers of government.

He said that comprehensive research should be initiated to collect data from the Corporate Affairs Commission (CAC), banks, and state ministries of trade and others, to determine and capture all possible VAT targets. Gana said globally, taxation was seen as the most stable source of government revenue for economic development, yet it was not being properly utilised in Nigeria.

He advised government to introduce additional taxes, such as toll tax for road, luxury goods tax on mansions, exotic cars, private jets and jewelleries. He also canvassed for the introduction of inheritance tax, which would be paid by a person who inherits money or property from dead relations. Gana also harped on the importance of developing agriculture, mining and tourism sector, which hold the potential for huge revenue stream for the government.

He urged governments to enhance collection efficiency, block leakages in revenue collection and beef up revenue monitoring and intelligence gathering. He said that with the introduction of new taxes, more funds would come into government’s coffers, the economy would be expanded and employment created. Executive Chairman of FIRS, Mr. Tunde Fowler, said that the process of recouping outstanding tax was intended to reduce and eliminate tax debts.

“At the beginning of the year, FIRS projected N4.9 trillion, while the 2016 budget projected N4.2 trillion. Till date, we have achieved 73 per cent of the approved budget.

“We still have a number of companies that are yet to pay their taxes and so, we will start the process of enforcement. There are currently five major sectors that are not as tax compliant as they should be. “These are the sectors we are going to focus on this quarter. These are telecommunications, aviation, multinational corporations, financial institutions and power,” he said.

Fowler said that this year, the service had captured 700,000 existing companies that had never paid tax into its database. He said that the service’s strategy was to improve revenue generation by improving the number of entities that pay tax and ensure that those entities pay the right tax.

He said that the service had deployed technology to improve tax collection, adding that this had brought accountability and transparency to the system.

 

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