The federal government’s plan to hike the Value Added Tax (VAT) from 5 per cent to 7.2 per cent yesterday came under severe attack from workers, private sector employers, financial experts, and the opposition Peoples Democratic Party (PDP).
They described the measure as anti-people and designed to wipe off the gains the workers made from the recent minimum wage increase from N18,000 to N30,000.
The Nigeria Labour Congress (NLC) and the Nigeria Employers’ Consultative Association (NECA) said that the decision by President Muhammadu Buhari’s administration to increase VAT from 5 per cent to 7.2 per cent would make nonsense of the new minimum wage increment.
The plan to hike VAT was announced on Wednesday by the minister of Finance, Hajia Zainab Ahmed, after the Federal Executive Council (FEC) meeting.
NLC general secretary, Comrade Emma Ugboaja, told newsmen in an interview that the VAT increment was not well thought-out as it would affect the job creation drive of the federal government.
He said: “We reject the increase as it clearly seeks to erode whatever purchasing power the new minimum wage may bring. We see it as a move not well thought through with the welfare of Nigeria wage earners in mind. Its impact on Nigerian manufacturers and job creation and retention will be nightmarish. It is clearly insensitive to the plight of the ordinary Nigerians. What the government needs to do is to widen the tax net and get people to pay tax and not to over tax those that are at present in the net.
In his reaction, NECA’s director-general, Mr Timothy Olawale, faulted the timing of the announced increment of VAT. He argued that the benefits of the recently signed national minimum wage of N30,000 would be neutralised by the proposed increase in the consumer or sales tax.
Olawale said that the increment would further reduce the purchasing power of the citizens, lead to increase in prices of goods and services, rise in inflation rate, and further contraction of the economy.
According to him, recently released data of the country’s Gross Domestic Product (GDP) growth indicated a contraction in Q4, 2018 (2.38 per cent), Q1, 2019 (2.10 per cent) and Q2, 2019 (1.94 per cent).
“Also, International Monetary Fund (IMF) has recently revised downward its global economic growth forecast to 3.2 per cent due to sluggish in global economy.
“Therefore, this suggests, that at such period of time, economies should be formulating fiscal measures/policies to stimulate their economies,” Olawale said in a statement he issued in Lagos.
In reaction to the proposed increase in VAT, the PDP, on its part, said that it totally rejected the decision by President Buhari to increase the VAT, saying that Nigerians cannot bear the burden under the prevailing “agonising economic situation.”
The PDP, which issued a statement on the VAT issue, said that the decision was “anti-people, suppressive and further confirmed the Buhari Presidency as extremely exploitative, inconsiderate and absolutely insensitive to the sufferings which it has plunged Nigerians into in the last four years.”
Its national publicity secretary, Kola Ologbondiyan, who signed the statement, insisted that the decision to increase VAT on already impoverished citizens was in bad faith and cannot be justified under any guise.
He said: “Indeed, only an administration that does not have the mandate of the people can seek to adopt such oppressive stance against its citizens.
“President Buhari ought to be aware that an increase in VAT will worsen our decrepit economy and put more pressure on families and business as it will result in increase in costs of goods and services that have direct bearing on the welfare of the people.
“Our party charges the Buhari Presidency not to further punish Nigerians by imposing harsh tax regime to make up for its crass incompetence and lack of capacity to effectively harness and manage our resources to create wealth for the benefit of the people.
“It is even more painful that the Buhari Presidency cannot give account of the huge resources at its disposal, including the taxes it has been collecting in the last four years, most of which are frittered to service the wasteful lifestyle of the cabal at the Presidency and All Progressives Congress (APC) chieftains.
“Instead of foisting more tax burden on Nigerians, the PDP charges President Buhari to account for and recover the over N14 trillion oil money established to have been stolen under his watch in the last four years.
“It is disheartening that at the time Nigerians ought to be enjoying the economic recovery and empowerment blueprint set out by Atiku Abubakar, which included slash in taxes and levies, they are rather faced with an unjustifiable and indefensible tax increase,” the party added.
The PDP appealed to the National Assembly to protect Nigerians and save the country from collapse by rejecting “this injurious decision by the Buhari Presidency.”