FG may increase VAT to pay new minimum wage – Budget minister

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Minister of National Planning and Budget, Senator Udo Udoma

Minister of Budget and National Planning, Senator Udo Udoma, and the Chairman of the Federal Inland Revenue Service, Mr Babatunde Fowler, on Tuesday said the Federal Government was considering an upward review of the Value Added Tax by 50 per cent.

Udoma and Fowler who stated this on Tuesday when they appeared before the Senate Committee on Finance, said the increment was to, among others, enable the Federal Government to fund the new national minimum wage.

Fowler said the proposed payable VAT by Nigerians based on the increment would actually be between 35 per cent (6.75%) and 50 per cent (7.25%)

The government is currently charging five per cent VAT on all products in the country

Udoma and Fowler were among the heads of the Federal Government agencies, who were in the Senate to explain the detail of the 2019-2021 Medium-Term Expenditure Framework and Fiscal Strategy Paper, which is expected to be the benchmark for the 2019 budget deliberations.

Fowler, who said the FIRS’ goal was to achieve an N8trn revenue generation target this year, also said the 50 per cent increment would affect the Company Income Tax and the Petroleum Profit Tax.

He said, “By the end of this year, we should be ready for an increase in 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 on 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.”

Fowler added that his agency had collated the detail of 34 million Nigerians that were captured in the BVN network with a view to assessing their compliance with the tax laws.

He added that the FIRS raked in N3.1trn in 2016, N4.03 in 2017 and N5.32tn in 2018 even as he expressed the hope it would surpass past records in 2019.

Fowler said the agency had increased VAT collection by 25 per cent in the last three years, but lamented that many of the firms that were collecting VAT were not remitting it.

“Nigerians should be ready for an increase in VAT with at least by 35 to 50 per cent this year. Nigerians travel to other countries and they pay more on tax”

Udoma also told the panel headed by Senator John Owan-Enoh, that the Technical Advisory Committee on the minimum wage, would submit its report to President Muhammadu Buhari this week.

He said, “Recall that as a result of agitations from unions, the President set up a tripartite committee to look at the minimum wage.

“Every five years, it is supposed to be reviewed. It has not been reviewed even though there is no doubt that for both the Federal Government and states, it is a tough time to review wages. But the N18, 000 is really too low and it is difficult for people to live on N18, 000.

“The President supported a review, but it is important that as we are reviewing (the minimum wage), we make sure that it can be funded that is why we set up the Bismark Rewane Technical Committee.

“We will be coming to you. There may be some changes maybe in VAT and other things. But we will be coming to you in order to make sure that we can fund the minimum wage.

“So it is something we are going to work closely with the finance committee on how best this minimum wage will be addressed, both from the Federal Government and the states to ensure that the whole government apparatus is not just paying salaries and nothing else.

“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”

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.

He also said efforts were on the way to ensure that capital projects and other sectors of the economy were adequately funded.

Udoma justified the benchmark recommended by the executive in the fiscal document and expressed confidence that necessary strategies were being employed to make them realisable.

The Federal Executive Council had in October last year, approved the MTEF/FSP and also proposed N8.73tn for the 2019 budget, which is N400bn lower than that of 2019, which is N9.12tn.

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.

Udoma said the expenditure aspect 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 Akabuese, while reviewing the performance of the 2018 budget, noted that it had achieved appreciable performance.

He also 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’.

The Chairman of the Senate Committee on Finance, Owan-Enoh, assured Nigerians that details of the senate version of the MTEF/FSP, based on the interactions with the officials, would be made known soon.

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