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"VAT IS DESIGNED TO SUPPORT THE POOR, NOT BURDEN THEM" SAYS FOWLER
The Executive Chairman, Federal Inland Revenue Service (FIRS), Tunde Fowler has stated that VAT is a consumption tax primarily designed to support the poor people, and not to create hardship for them.
Fowler allayed fears that the increase in VAT may cause hardship for the poor, stating that VAT is charged on consumption and capacity to consume.
Said the FIRS Chairman; “When you don’t consume certain categories of goods and services, you are not liable to pay VAT charges on those items.
VAT is not charged on all medical and pharmaceutical products. It is not charged on basic food items. It is not charged on books and educational materials.
It is not charged on baby products, fertilizers, locally produced agricultural and veterinary medicine.
VAT is not charged on farming machinery and farming transportation equipment.
“VAT is not charged on all exports, plant machinery and goods imported for use in Export Processing Zones and free trade zone: Provided that 100 percent production of such company is for export.
“Other services exempted from VAT are Medical services, Services rendered by Community Banks,
People’s Bank and Mortgage Institutions, plays and performances conducted by Educational Institutions as part of learning and all exported services are exempted from VAT.
Fowler noted that the revenue generated from VAT is channeled towards assisting the poor by providing basic amenities that are needed in the society.
Fowler made this clarification in Lagos at the weekend on Friday at the maiden edition of the Nigeria Tax Outlook (NTO) Stakeholders Roundtable Series organised by Nigeria Taxpayer Hub.
“I was at a programme at the Senate. I was talking about projection in 2019 for the VAT. And I was asked a question about what my personal views were about the VAT and some people got it a bit wrong. Let me clarify some things.
“I understand that some people misunderstand what the VAT is. VAT is a consumption tax.
If you don’t have money to purchase certain categories of goods and services and you don’t consume them, then VAT is not your problem.
The VAT is used to assist the needy. VAT provides support for the needy, not a hardship on them. 85 percent of VAT collected is shared among states for them to provide free education, free health services, provide basic amenities among others.
“We can see what the Federal Government is doing with the tax money. Look at the rail system, the Abuja-Kaduna rail is complete.
Look at the Lagos-Ibadan expressway, look at the education system, the school feeding program among others.
If at the state level, your government cannot justify the taxes you pay to them, you have the right to vote them out in the next four years”, Fowler said.
Fowler said that if countries like United Arab Emirate (UAE), Saudi Arabia who are rich in oil resources would be laying emphasis on taxation, Nigeria should also emulate them.
The FIRS Chairman also explained that Nigeria’s economy is only picking up in recent times because former administrations over-looked tax reforms and depended on the depletable mineral resources.
“In the 1960s African countries were getting their political independence from their colonial masters. Shortly after, they started discovering mineral resources.
For instance, in 1970, Nigeria had the oil boom. African countries erroneously thought that discovering the mineral resources was all they needed.
But you would realise that the persons who processes the minerals and sells it back to you actually makes more profit than you.
The African Union has what is called the 2063 Agenda which simply means that by the year 2063, Africa as a continent will no longer require aid;
that by then we would have been able to source enough Internally Generated Revenue (IGR) to fund our own programmes.
I however have a different opinion. I believe that no developed nation will be willing to carry any country until 2063.
I believe in what the AU said that if we don’t develop our own countries, no other country will do that for us”, he said.
At a Senate hearing last week Tuesday, Fowler called for an increase in the number of Nigerians and companies paying VAT and not a 50 per cent increase in VAT rate.
He also called for a reduction in Companies Income Tax (CIT) rate for small businesses so as to improve compliance.
Though he indicated that there should be an increase in VAT rate by the end of the year, he NEVER, for once suggested a 50 per cent hike of any percentage increase at all.
Rather, he promised improved collection in CIT, Petroleum Profits Tax and VAT in 2019 relative to the collection performance of the Service in 2018,
