Nigerians Reaction to the 7.5% increase in VAT
ing attempts to increase the revenues accruing to the government, the Federal Executive Council approved plans geared towards the increase in Value Added Tax (VAT) from 5% to 7.5% thus represent a 50% increase in VAT which has been active since 1994. This decision by the Federal Government was taken during the Federal Executive Council meeting held on Wednesday at the Presidential Villa, Abuja. Nigeria collected about N1 trillion in VAT in 2018. A 50% increases could generate over N400 billion in additional revenue for the government if everything remains constant and economic situations stayed favourable.
This decision came about because it is widely believed that the country has been facing revenue crisis since oil prices dropped in 2014 and since the present administration under President Buhari took over power, government revenue has failed to keep up with that of the immediate past administration which was over N12 trillion. Total Revenue going into the federal account in 2018 was about N7.1 trillion compared to a budget of N10.4 trillion and was worse in 2017 with about N4.9 trillion.
More so, VAT revenues are also a significant portion of government revenues. In 2018, total VAT revenue accruing to the Federation account was N1.04 trillion or 14% of revenues.
Last year, the government budgeted N7.1 trillion as targeted revenue but only actualized N3.8 trillion. Out of this amount, VAT collection was about N146.5 billion while the targeted amount was N207.5 billion. This put the Federal government is in a very tight situation. Therefore, an alternative source of revenue is a welcome development. In light of all these, the government have passed into law VAT of 7.5% with its implementation already in motion since January 1, 2020.
How does the increase in VAT affect Nigerians?
VAT is a form of consumption tax and only incurred only when a consumer consumes a commodity that have VAT attached to it. With the increase in the value of VAT, Nigerians will notice an increase in all items ranging from consumable goods to services provided by businesses like Telecommunication. This leads to a rise in the prices of goods and services and a reduction in the disposable income of individuals.
Following this development, many Nigerians have realized that they have to pay VAT whenever they buy goods or make use of services up to the extent when they make phone calls or even send SMS. After sending an SMS, N4.10 will be charged instead of the usual N4 cost of SMS. This confirms that VAT is applied on every SMS and even on outgoing calls. The same applies each time someone purchases data plan. The interesting thing is that the longer the call, the more VAT one pays.
Some Nigerians especially the average Nigerians are feeling frustrated about it. Some are still shocked and seem not to come to terms with the new law while others through the social media say their mind on the situation. Some have accused the government of using the VAT as a way of taking back the new minimum wage that was increased from N18,000 to N30,000. The government in the country are not known to provide infrastructures to the benefit of their citizens, hence any tax law does not sit well with the people because they have nothing to benefit from the taxes and levies being imposed on them by the government. It is still the government officials that will steal the money the money their personal benefit and to send their families for medical treatment and education! Why pay for them to steal?
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