FG plans 50% increase of VAT to fund N30,000 new minimum wage


The Federal Government has announced plans to hike Value Added Tax, VAT, by up to 50 per cent (from the current 5 per cent to 7.5 per cent) to enable it fund the N30,000 new minimum wage approved by the Senate yesterday. Also to be increased are Company Income Tax, CIT, and Petroleum Profit Tax, PPT.

This was disclosed, yesterday, when the Minister of Budget and National Planning, Udoma Udo Udoma, and Executive Chairman, Federal Inland Revenue Service, FIRS, Babatunde Fowler, appeared before the Senate Committee on Finance for an interactive session over 2019 to 2021 Medium Term Expenditure Framework and Fiscal Strategy Paper, MTEF/ FSP.

They hinted that the tax increases were inevitable, arguing that the new national minimum wage will further increase the size of the 2019 budget already in deficit.

Fowler particularly told the Senator John Enoh (APC, Cross River Central) led Committee on Finance that the proposed payable VAT by Nigerians based on the increment would be between 35 per cent (6.75 per cent) and 50 per cent (7.25 per cent).

The FIRS boss, who noted that the set goal of the revenue generating agency was to achieve N8 trillion revenue target this year, of which N3 trillion is expected from VAT, just as he puts total tax revenue for 2018 at N5.3 trillion; N4.03 trillion in 2017; and N3.31 trillion in 2016.

He stated: “By the end of this year, we should be ready for an increase in the VAT. A lot of Nigerians travel to Ghana and other West African countries and they can see that theirs is much higher. They pay when they go for those trips. We should be ready for an increase in VAT.

“I can certainly see an increase in VAT of at least 35 per cent to 50 per cent this year based on our enforcement activities. There, certainly will be an increase in Company Income Tax and also on Petroleum Profit Tax.”

Udoma, on his part, disclosed that the Federal Government had concluded plans to set up a committee to look into ways of increasing revenue to fund the new national minimum wage.

In view of this, he stressed that the government was considering to forward requests to reflect slight adjustments to the 2019 budget especially as regards sourcing revenue to foot the bill for the new national minimum wage.

The minister also disclosed that the committee was expected to enter into negotiation with those who are already above the minimum wage bracket and lower the burden on government.

Udoma, who noted that the Technical Advisory Committee on the minimum wage would submit its report to President Muhammadu Buhari this week, said: “It will be recalled that as a result of agitations from the unions that the President set up a tripartite committee to look at the Minimum Wage.

“Every five years, it is supposed to be reviewed. It has not been reviewed even though there is no doubt that for both the Federal Government and states; it is a tough time to review wages. But the N18,000 is really too low and it is difficult for people to live on N18,000. Nigeria earns N3.72trn from royalties, petroleum tax in one year

“The President supported a revision but it is important that as we are revising (the minimum wage), we make sure that it can be funded that is why we set up the Bismark Rewane Technical Committee.

“So we will be coming to you. There may be some changes maybe in VAT and other things. But we will be coming to you in order to make sure that we can fund the minimum wage.”

The MTEF, the document on which the 2019 budget is predicated, was sent to the National Assembly on November 7, 2018, although with slight differences on the expenditure. While the MTEF has an expenditure framework of N8.7 trillion, the budget shows a figure of N8.826.

The Minister of Budget and National Planning however attributed the difference to recent upward review of the salaries of the police and expressed concern that the New National Minimum Wage will further increase the size of a budget already in deficit.

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