Thread by @wFalabede

We can't be gladly accepting donations from a nation that charges its own citizens as high as 20% in VAT while at the same time refuse to support an increase in VAT to only 7.2% from 5% in Nigeria.

Can we afford not to increase the VAT rate?

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Here are some of the opinions I have come across since the news broke

Increase in VAT will lead to an increase in the prices of commodities which will affect the poor and middle-income earners.

More opinions from the opponents of VAT increase

Reducing government spending by hiring fewer aides attached to political officeholders will eliminate the need for VAT increase.
Reduce National Assembly Budget
Higher inflation rates

Let's first review our revenue & Expenditure

In the 2019 appropriation bill

=N=8,916,964,099,373

N8.9 Trillion was the total budget as signed into law.

How much of this goes to the national assembly?

The total appropriated to the national assembly was N128B out of N8.9 Trillion. That figure represents 1.46% of the total budget. The presidency also got N51+B (0.54%)

Combined budgetary allocation to the two of them is only 2% of the entire budget.

As much as I am against the NASS excessive budget, it is a drop in the ocean. It consumes 1.5% of our national budget. Our budget can not be balanced by just simply cutting off the NASS funding.

It should never be a reason why anyone opposes VAT increase.

Because the criticism centres around the recurrent expenditure, I will break down the recurrent so as to present the information in a way everyone can be the judge. I understand there will be varying opinion on this.

The total recurrent expenditure allocated to the federal executive including all the ministries is N2.55 Trillion which seems to be an unreasonable amount until we realize that it is meant for over 30 ministries servicing 200 million people.

Ministry of the interior got the largest share with N564B ~$1.85B followed by education (N463B ~$1.5B) , the military (N430B less than ~$1.4B ) and Health N315B ~$1.03 all at the official rate. IMO this amount is too low to effectively serve the citizens of this great nation.

Due to the unavailability of the total revenue generated for 2019, I will use the 2018 figure to gain a better understanding of our revenue. It is safer to assume that we won't double 2018 revenue in 2019.

Now what does 2018 tells us about 2019

In 2018, the budget was based on FGN revenue of N7.16T but we only realized N3.96T. That's almost a shortfall of 45%. Our expenditure was 6.94T instead of the budgeted 9.12T

In other words, we didn't live within our means by 2.98T

Oil accounted for 59% of FGN revenue in 2018. Company income tax 16%, VAT 3.3%, Customs collection 7.8% and Independent revenues 11.46%.

Verdict - tax contribution to revenue is too low. Way too low.

Our other options are to keep borrowing or rely on foreign donor and grants to fund the deficit. While borrowing is not entirely bad with a good revenue base, grants and donations come with strings attached that expose the nation to FOREIGN INTERFERENCE.

UK, one of our donors, and creditors charge up to 20% in VAT depending on the product and services while we the recipient of their citizen's tax contribution are refusing to support VAT rate increase.

While an annual £50M donation from the UK through agencies such as the DFID to Nigeria may be little, it is enough to give them a voice in our national affairs. If we want to be truly independent, it is time to start paying the pipers.

theguardian.com/world/2017/aug…

Wastage and corruption are no excuse for not supporting VAT increase.

If we have no problem accepting donations and loans from the UK & US whose citizens are getting crushed with excessive taxation, then we should be willing to accept the rate increase.

usaid.gov/nigeria/press-…

If you are still wondering why we can't just reduce our expenditure, our debt servicing alone is more than a quarter of our expenditure. Even if we reduce the remainder by 20%, it still won't be enough.

The budget data showed that N2.2 trillion (25.3% of the total budget) goes to debt servicing. This is not something we can wish away.

There is no doubt that we need to properly fund all the important sectors of the economy like healthcare, education, infrastructure and security services. How we do this is the subject of disagreement and it is the reason many are opposing VAT.

When cost exceeds revenue, there are three solutions we must consider.

Increase revenue
Cut cost
Increase revenue and cut cost.

IMO we can increase revenue and cut cost at the same time.

Let me point out that there are many ways to increase revenue. One of them is to increase the tax base through the expansion of the economy.

In the short term, loans or raising taxes seems to be the most effective.

Building a world-class education system, a strong military and an effective healthcare system will require us to foot the bill. Our penchant to rely on foreign donations and grants will do us no good. It will only enslave us further.

Another reason many are opposing VAT is the fear that it will lead to an astronomical increase in the prices of commodities. Many middle-income earners are especially miffed at the idea of a VAT increase.

Will VAT really increase prices on all commodities? or cause inflation?

Will VAT really increase prices on all commodities?
Who bears the burden of an increase in VAT?
Are there any positives from the increase?

I will address those issues in the next thread.

If you are a business, you might want to switch on your notification for a strategy on taking advantage of the VAT increase. How do you make sure that you don't overpay VAT and unnecessarily increase your product's price? More to come.....