No VAT Hike Without Money Bill…Falana

No VAT Hike Without Money Bill…Falana

…Says FG Cannot Impose or Increase Tax Without a Law Human Rights Lawyer, Mr Femi Falana, has called on the Federal Government to propose a Money Bill to the National Assembly before implementation of any increases in Value Added Tax (VAT). Falana said that the National Assembly erred by inviting the Minister of Finance and

…Says FG Cannot Impose or Increase Tax Without a Law

Human Rights Lawyer, Mr Femi Falana, has called on the Federal Government to propose a Money Bill to the National Assembly before implementation of any increases in Value Added Tax (VAT).

Falana said that the National Assembly erred by inviting the Minister of Finance and the Executive Chairman of the Federal Inland Revenue Service (FIRS) to clarify issues of VAT increment.

According to him, provisions of the Constitution states that the President ought to have presented a Money Bill to be passed by the NASS before the increment.

He said: “It’s illegal, under a democratic dispensation, you cannot impose tax or increase tax without a law made by the National Assembly or the State Assembly as the case may be.

“In this case, it has to be realised that we are not under a military dictatorship.

“By virtue of section 59 of the Nigerian Constitution, any increase, levy or tax will have to be presented to the National Assembly by way of Money Bill by the President, it has to be passed into law.

“The Senate erred in law by inviting them to come and clarify, the National Assembly has invited the Minister of Finance and the Federal Inland Revenue Services to come and clarify.

”No, the National Assembly must insist on its powers under Section 59 to pass a law to increase VAT or any tax, there can be no taxation without a legislation.

“The Federal Executive Council has no power under the Constitution to increase VAT or any tax in the country.”

The Federal Executive Council had last Wednesday approved the hike in VAT from 5 per cent to 7.5 per cent.

The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed explained that the increase which would generate over N2 trillion, would only begin after the VAT Act was amended by the National Assembly and after consultations with the state and local government areas as well as the Nigerian populace.

According to her, our projection is to finish consultations early enough so that it takes effect in 2020.

She further disclosed that the FEC approved the Medium Term Expenditure Framework and Fiscal Strategic Paper, MTEF/FSP for 2020 to 2022, which will guide the 2020 Budget. The Minister also said the next step was to present the document to the National Assembly for consideration.

There have been loud cries from many quarters kicking against the planned VAT increase based on the recommendation of the Presidential Technical Advisory Committee.

But a statement from the Federal Ministry of Finance signed by Mr Yunusa Tanko Abdullahi special assistant, Media and Communication to the Finance Minister maintained the increase was justified.

The nation’s VAT rate, it said “will still be at about half the African average and amongst the lowest in the world, thus sub national governments get 85%.”

The benefit of an increase in VAT, it added is that it will be “more beneficial to state governments and Local Government Areas(LGAs) in the country, many of which are already facing difficult conditions. The proposed increase in VAT is therefore expected to create additional fiscal space.

“The proposed increase is however subject to legislative intervention by the National Assembly that will have to amend the Revenue Act to reflect the proposed increase,” he said.

The existing VAT Act exempts the basic necessities such as food, medicines and education which therefore minimises the impact on the poor and vulnerable segments of the Nigerian society from the burden thereof. It is expected that the exemptions will be maintained in the amended Act.

Abdullahi noted that “the VAT increase, if correctly implemented, could bring in huge revenues, which would actually reduce the fiscal deficit burden.”

“The government’s borrowing programme could then ease and certainly the financially affected states and local governments could later focus on issues like poverty reduction, healthcare and power generation and transmission,” he explained.

He quoted industry experts, who he said have agreed that “VAT increase, if enforced properly, forms part of the fiscal consolidation strategy for the country. It could, in fact, help address the fiscal deficit problem and the revenues estimated to be collected could actually mean lowering of the fiscal deficit burden for the government across board.”

Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, says the plan to increase Value Added Tax (VAT) from five per cent to 7.5 per cent is in the right direction to raise country’s revenue.

Emefiele stated this while fielding questions from journalists after the Monetary Policy Committee meeting held in Abuja. He said the government had responsibility to fend for every citizenry by providing basic infrastructure like roads, electricity and hospitals among others.

He explained that the government had only two ways to fund such projects, which are by raising revenue and through loan collection.

According to him, the present government has been criticised by some people for high rate of debt incurred.

“Government unfortunately has no option, if it does not borrow, it must raise revenue and you all agree with me that it has obligations to meet up with.

“The increase of VAT to 7.5 per cent is low compared to other countries, in fact, with this increase, Nigeria has the lowest in the world.

“If the government can meet its obligation through this increment, it should be supported,” he said.

He appealed to Nigerians to show understanding and support government’s policies. To say that the proposed new 7.2 per cent Value Added Tax rate for the country, up from the current 5 per cent is already a hotly debated issue, is simply stating the obvious. Truth is, fears are being expressed by a lot of people who hold the view and very strongly too that the new policy regime, to all intent and purpose, was not well thought out.

Mrs Ahmed, had said, “We are proposing and council has agreed to increase in the VAT rate from five per cent to 7.2 per cent. This is important because the federal government only retains 15 per cent of the VAT; 85 per cent is actually for the states and local governments. The states need additional revenue to be able to meet the obligations of the minimum wage.”

A value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed.

From available information, as of 2018, 166 of the 193 countries with full UN membership employ a VAT, including all OECD (Organisation for Economic Cooperation and Development) is an intergovernmental economic organisation with 36 member countries, founded in 1961 to stimulate economic progress and world trade) members except the United States, which uses a sales tax system instead.

According to Mr Olajide Abiola, a public affairs commentator, “the VAT increase does not adversely affect the common man as some have falsely peddled. Like it has been stated, it is a consumption tax and the greater benefit goes to the states. It is now left to us to either vote the right governors or hold them as accountable as we do the federal.”

Speaking on the proposed new VAT rate, Mr Omooba Sosanya, one of the founding fathers of the Association of National Accountants of Nigeria (ANAN), the second widely acclaimed national accounting body in the country, said, the new policy regime, is simply an eclectic approach to issues of national development.

In his own view, the federal government is simply shooting itself on the foot if it thinks that the N2.2 trillion being projected as VAT receipts in the proposed new rate would solve the problems confronting the country’s economy.

“The problem of taxation in Nigeria, VAT in particular is not a question of rate but has to do with the poor and inefficient tax administration. For instance, Canada, Saudi Arabia, and many other countries still charge 5 per cent VAT rate and they are doing well in terms of generating adequate revenue.

“In Nigeria, it is not a matter of rate. Tax administration in Nigeria is ineffective and inefficient and the administration is over whelming the Federal Inland Revenue Service (FIRS). What we need to generate more revenue through taxes, including VAT, is to bring more taxable persons who would be paying tax. The whole idea of allowing the FIRS alone to be collecting the VAT is counterproductive. We need to decentralise VAT collection, where by all the states would be able to administer the VAT so you can bring in more people into the tax net including the informant sector,” he said.

He said that if the VAT collection is decentralised, the country stands the chance to generate about N1trillion through VAT on a monthly basis and N12trillion annually.

Photo: Finance Minister, Mrs Zainab Ahmed

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