Proposed VAT increase will reduce consumer spending, hinder economic growth, says ACF

The Arewa Consultative Forum (ACF) has opposed the provision of the tax reform bills proposing an increase in the value-added tax (VAT) from 7.5 percent to 15 percent.

Speaking on behalf of the ACF at the public hearing on the tax reform bills organised by the house of representatives committee on finance on Thursday, Yerima Ngama, a former minister of state for finance, said the proposed VAT increase would reduce consumer spending and hinder economic growth.

In the bill, VAT will be increased to 12.5 percent by 2026, 2027, 2028, and 2029, and 15 percent by 2030.

VAT refers to a consumption tax on goods and services levied at each stage of the supply chain where value is added.

Ngama said increasing VAT would worsen economic hardship amounting to “punishing” taxpayers.

He said the federal government should expand the tax net instead of increasing VAT.

“We should be talking about improving our capacity to collect the collectable tax, but not increasing it,” Ngama said.

“What importance is increasing the tax when you cannot collect up to 30 percent of it?”

He recommended retaining the current 7.5 percent VAT rate, saying Nigerians are already grappling with enormous economic challenges.

“We also believe that the current VAT rate already places a significant burden on citizens and businesses,” he said.

“Increasing the rate further could have unintended consequences, such as reducing consumer spending and harming economic growth.”

Ngama said the powers attributed to the chief executive officer and chairman of the board of directors/governance of the proposed joint revenue board should be reduced.

He said the bill concentrates excessive oversight and accountability powers in the hands of one individual.

“The national revenue service chairman is too powerful. We know he is a hardworking person, but the workload is too much for him,” the former minister said.

“He appoints the coordinating directors; he chairs the board of NRS—that is too much for him.”

He suggested that the president should appoint the coordinating directors as executive directors, subject to the approval of the senate.

Ngama also recommended an amendment to section 69 of the proposed Nigeria tax bill to retain the Tertiary Education Trust Fund (TETFUND) and National Information Technology Development Agency (NITDA).

He said the two agencies play vital roles in promoting education and technological development in the country.

The four bills—the Nigeria Tax Bill, the Tax Administration Bill, the Joint Revenue Board Establishment Bill, and the Nigeria Revenue Service Bill—have scaled the second reading at the senate and house of representatives.

The senate held a public hearing on the bills on Monday and Tuesday.

The green chamber began its public hearing on Wednesday and will run until Friday.