Experts have warned the government against increasing value-added tax (VAT) in a desperate move to increase public revenue. The Fiscal Policy and Tax Reform Committee, led by Taiwo Oyedele, proposed an increase in VAT to generate more revenue in the 2024 National Tax Policy (NTP) proposal submitted to the government.
An international business research firm, Economist Intelligence Unit (EIU), predicted that the federal government could raise the VAT to 15 per cent from the current 7.5 per cent to fund its fiscal deficit and debt service obligations.
Nigeria is currently burdened with a high debt amounting to N97.34 trillion, expected to rise to over N107.38 trillion by the end of 2024 due to fresh borrowings. The country is also facing a heavy debt service obligation, with the International Monetary Fund (IMF) stating that 56 per cent of Nigeria’s tax revenue is being used for debt servicing.
Economists believe that increasing the VAT could burden investors and businesses already struggling with multiple taxation, impacting profit margins, investment growth, consumer purchasing power, and competitiveness. Professor Godwin Oyedokun suggested that instead of raising the rate, the government should focus on improving VAT collection efficiency and expanding the range of goods and services subject to VAT.
Dr. Titilayo Fowokan of the Chartered Institute of Taxation of Nigeria (CITN) believes that while a VAT increase is overdue, the government should consider other fiscal policy interventions to mitigate the impact on consumers and businesses. Tommy Okon, National Vice President of the Trade Union Congress (TUC), criticized the potential VAT increase, stating that it would further impoverish the masses already struggling with economic challenges.