Revenue Mobilisation, Allocation & Fiscal Commission Wants VAT Increased To 7.5%

The Revenue Mobilisation, Allocation and Fiscal Commission called for an upward review of Value Added Tax from five per cent to about 7.5 per cent in order to improve the country’s revenue base.
The Chairman, RMAFC, Mr Shettima Gana, said this on Thursday in Kano at a two-day National Revenue Retreat.
Speaking on strategies to expand the revenue base of the government and the new sources for revenue generation, Gana said that Nigeria’s current VAT rate of five per cent was low.
He explained that charge on goods and services charged in Nigeria was one of the lowest in the world.
He said that in South Africa VAT was 14 per cent while in Togo, Senegal, Guinea and Chad, it was 18 per cent, and Niger 19 per cent.
He urged the Federal Government to start the process to increase it to between 7.5 per cent and 10 per cent.
VAT is collected by the Federal Inland Revenue Service and shared to the three tiers of government.
Federal government receives 15 per cent, state governments, 50 per cent and local governments, 35 per cent.
Gana said that VAT was a high tax revenue yielding instrument that could be used to shore-up revenue required for financing the ever-expanding public expenditure and the needs of all the tiers of government.
He said that comprehensive research should be initiated to collect data from the Corporate Affairs Commission, banks, and state ministries of trade and others, to determine and capture all possible VAT targets.
Gana said globally, taxation was seen as the most stable source of government revenue for economic development, yet it was not being properly utilised in Nigeria.
He advised Government to introduce additional taxes, such as toll tax for road, luxury goods tax on mansions, exotic cars, private jets and jewelleries.
He also canvassed for the introduction of inheritance tax which would be paid by a person who inherits money or property from dead relations.
Gana also harped on the importance of developing agriculture, mining and tourism sector, which hold the potential for huge revenue stream for the government.
He urged governments to enhance collection efficiency, block leakages in revenue collection and beef up revenue monitoring and intelligence gathering.
He said that with the introduction of new taxes, more funds would come into government coffers, the economy would be expanded and employment created.
Similarly, the Director, Revenue and Investment, office of the Accountant-General of the Federation, Mr Bakari Wadinga, called for the need to harmonise Personal Income Tax (PIT) collection.
He said that FIRS should be allowed to take over the collection of PIT and it should be modelled after VAT collection.
He said that the present model which allows every state to collect its own PIT was ineffective and allowed huge revenue loss.
“It will be recalled that prior to the introduction of VAT in 1993, it was the sales tax which was being collected by state governments.
“In 1992, the total collection by the entire states of the federation put together, was less than N300 million, but by 1994, when VAT came into effect, the total VAT collections rose to N7 billion.
“By 1995 it rose to N21 billion and 10 years after, VAT rose to N222.6 billion in 2006 and over N700 billion in 2013.
“Thus, greater tax revenue could be raked in if there is collaboration on PIT collection by both states and federal government,” he said.
Wadinga said that if this was adopted, it would result in greater tax revenue generation for sharing.