Companies with less than N10m turnover should be exempted from VAT — CITN president

The Federal Government recently announced plans to increase Value Added Tax from five per cent to 7.5 per cent. Do you feel this is appropriate? It is appropriate. There is no right time for it. The problem in this country is that we fail to face reality. The VAT Act was promulgated in 1993 and came into effect in 1994. Our VAT is the lowest when compared with other countries. The idea then was that, let us start from there and continuously, we will move it up. But 25 years on, nothing has been done. In 2007, when the idea was moved, it was killed. Earlier this year, when it was moved, it was killed. So when is the right time? You know it is a consumption tax, so it is very easy to collect, it is very easy to pay because you pay without knowing that you are paying tax as you are enjoying what you are collecting. There are exempted items that affect everyday life of the common people. All those things have been exempted, leaving virtually the luxury items. It is the middle people and the rich that will buy the luxury items. What are the other side effects of this increase? The problem is that it will affect cost of goods and items in the fact that manufacturers will have to pay higher VAT. And what should be done is to amend the tax law. There should be threshold for registration for VAT. Companies with less than N10m revenue should be exempted from registration. For manufacturers, they should exempt raw materials from VAT, so it will not affect the cost of production. We need to look at the areas of the companies income tax to amend. We can reduce the companies income tax and personal income tax. That will release more money to employees and they will have more money to spend, and they will pay tax. I think what we need to do is to request for accountability because we are doing our obligation to the country. The government should reduce the cost of governance. Going by the query that tax collection between 2012 and 2014 was better than 2015 and 2018, is that not an indication that the decline was caused by the bad economy under the present administration? They need to make some research before they come out to condemn somebody. Between 2012 and 2014, how much was oil price? Oil was over $100 per barrel. And if you look at the figure for collection for those years, oil majorly was over 50 per cent. While in the period of Babatunde Fowler, we saw oil price falling below $50; look at the disparity. Of course, collection will be low. When things like that happen, you are forced to look inward, and that was what Fowler did. What were the areas he looked at? He looked inward by looking at the Value Added Tax. He looked at what was happening, looked at the people who were outside the tax net, and brought them in. By that, he succeeded in moving the number of tax payers from 10 million to 20 million. If you look at collection now, we are moving from oil revenue to non-oil revenue. And that is the way it should be. He is institutionalising taxation away from oil revenue. This is what the government should appreciate. People who are making noise are making noise because they are not looking at the economic climate of the nation. It is very bad. I don’t have the figures now, but I can tell you non-oil revenue is over 50 per cent, oil revenue is less than 50 per cent. That is the way it should be and going forward. He has given us indices of how to go about it. Look at people who are not in the tax net. Issues of Voluntary Asset Income Declaration came, issues of bank statement, using data, that is what this country needs. Bringing out people who have millions in their accounts and are not paying taxes. How will you have billions in your accounts and you are not contributing to the economy that gave you those billions. How can you have N100m in your account and you are not even paying a kobo to the coffers of the government that gave created a conducive environment and the enablers for such person to make that money. As far as I am concerned, I think it is the people that Fowler has touched that are fighting back. He is fighting them and they want to fight back. I know that Fowler means well for this nation, and it will be sad if he is sacrificed just like that. Voluntary Assets and Income Declaration Scheme was being implemented before it was stopped. How will you describe the impact of this on the revenue? VAIDS was just for a period, it was a targeted period of one year. The Federal Government started it on the first of July 2017, and it was meant to end in March 2018. But it was extended till 30th June 2018. With the Voluntary Assets and Income Declaration Scheme, they said ‘if you have not been paying taxes, come and pay. This is my asset, this is my income, I want to pay tax.’ And the opportunity came that once you do that for those periods, ones you pay the taxes and you are cleared, you will not be audited for that same period again. For instance, ‘you come out to say since 2014, I have earned N1bn; I have not paid taxes on this N1bn, now I want to pay. This is the value of my assets and my income and it is taxed,’ you now pay tax on it, that is from 2014 to 2015. What the law says is that for those periods, you will not be audited again. You are forgiven. But beyond that period, 2015 to 2016, you can still be audited if you have income and assets to declare and you did not declare then, you will be audited. VAIDS is for a one -year period, so after, anybody that is caught will be audited, pay interest and could even go to jail, since such person did not come up to declare his or her assets and income. Forensic audit will be carried out. Since the coming to power of the present regime, thousands of jobs have been lost while a lot of business concerns have either closed down or recorded losses and these entities were expected to pay taxes. Should Fowler still be blamed for this? The economic climate was not right. There was recession. People were smuggling raw materials, all these things add to the effects of the macro economy. Businesses were closing down, companies were reducing their workforce. If you look at the companies available, if you look at their financial statement, how much they spend on energy, it is huge. Most of these companies have sophisticated equipment they use for production that cannot afford that,    such equipment will suddenly stop working. Some, because of the sensitivity of their equipment, they are always on generator. Those that are running on gas have to.


Source: Punch