FSDH Merchant Bank, yesterday, cautioned the federal government against the proposed hike in Value Added Tax (VAT) rate, even as it recommended measures for increasing VAT revenue by 218 percent. The bank, in its monthly Economic and Financial Market Outlook, stressed that the proposed increase in VAT rate to 10 percent from five percent will reduce household consumption and compliance with tax payments.
Speaking at a media presentation of the outlook, Head of Research, FSDH Merchant Bank, Ayo Akinwunmi, said: “FSDH Research’s analysis shows that government can earn more revenue from the Value Added Tax (VAT) in Nigeria by developing strategies to increase household consumption and increase VAT compliance “The consumption data and revenue from VAT in the Federation Account Allocation Committee (FAAC) shows that the ratio of VAT revenue to household consumption averaged 1.07 percent between 2014 and 2018. The highest of 1.15 percent was recorded in 2014. This is significantly lower than the actual VAT rate of five percent.”