Economist disagrees with IMF on VAT increment

By Odunewu Segun

An economist has advised President Buhari not to consider the recommendation of the International Monetary Fund asking the government to increase the Value Added Tax (VAT) in other to broaden revenue base.

Prof. Uche Uwaleke who gave the advice said an increase in a consumption tax like the VAT would result in violation of the principle of tolerable tax burden on Nigerians

According to him, Nigeria has one of the highest poverty rates in the world and it will be unfair to compel the masses to increase their tax on consumption. “ I am aware there are those who argue that Nigeria has one of the lowest tax rates in the world, especially with respect to Value Added Tax which is currently at five per cent, but other indices most be considered as per the average living condition of Nigerians”

He said in a country where unemployment rate is on a steady increase with many youths unable to find gainful employment, any additional burden in the form of taxation when there are no corresponding creation of jobs will be unfair.

The Managing Director of the International Monetary Fund (IMF), Ms. Christine Lagarde had on Wednesday advocated for the broadening of the Nigeria’s revenue base by increasing the value added tax (VAT) paid for goods and services.

Lagarde, while advising Nigeria to increase its VAT, noted that its VAT rate was not only among the lowest in the world, but also well below VAT rates in other countries of the Economic Community of West African States (ECOWAS).

She further urged the federal government to mark up its revenue drive by broadening the nation’s tax base and simultaneously reduces leakages by promoting compliance and enhances the efficiency of revenue collection.

“At the same time, public finances can be bolstered further to meet the huge expenditure needs. For example, the current VAT rate is among the lowest in the world and well below the rates in other ECOWAS member’s countries, so some increase should be considered.

Commenting on the decision of the Federal Government to put an end to subsidy payments, Uwaleke said it should be removed, especially now that the prices of crude have crashed in the international market.

According to him, the opportunity cost of subsidising fuel is very high and from what we have seen, it is one measure which has benefited only a few. Uwaleke urged that the huge savings from fuel subsidy removal should be invested in projects that have real benefits for the ordinary Nigerian.

“So, l share the opinion of Christine Largard in this regard, but certainly not on the issue of raising the VAT,’’ he said