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Consumers are in for tougher times as the federal government
appears bent on going ahead with its plan to hike the Value Added Tax (VAT)
rate a notch further.

During the 122nd meeting of the Joint Tax Board (JTB) held in
Abuja recently, Ifueko Omoigu-Okauru, the executive chairman, Federal Inland
Revenue Service (FIRS), was non-committal about the exact date the proposed
increment would take effect, though she did not deny that there was such a plan
in the pipeline. Mrs. Omoigu-Okauru disclosed that the federal government is
still consulting to know the best time and mode to act on the issue.

When the issue was first mooted, following the amendment to the
VAT Act in 2007 empowering government to adjust the rate to about 10 percent,
the argument was that the prevailing rate then was not only the lowest in
Africa, but the five percent has remained unchanged since VAT collection
started in 1993.

The government’s argument was that allowing the rate to remain
at that level would not only distort trade, but would also discourage
competition within the region, considering Nigeria’s position as a formidable
member of the Economic Community of West African States (ECOWAS).

Though the decision was reversed at the inception of former
President Umaru Yar’Adua administration following public outcry against the
hike, the plan to review the VAT rate back to at least 10 percent is said to be
in line with the policy directives of the ECOWAS Commission for member-states:
harmonise their low VAT regimes and close the gap within the range of 10 and 20
percent.

Manufacturers are still
groaning

A recent report by the Manufacturers Association of Nigeria
(MAN) indicated that manufacturing companies are compelled to spend a huge chunk
of their operational cost on the provision of fuel to run alternative power
generating systems, since the source of public power supply has remained
unreliable.

According to the report, some of these companies have been
compelled to close down, while millions of their workers have been sent to the
over-crowded labour market. The few companies that have managed to stay in
operation are producing at such high costs that the prices of the final
products off the shelf are grossly unaffordable by the average consumer.

But government’s argument in support of the latest attempt at
raising the VAT has been that revenue earned would provide a veritable source
of financing a number of activities and services, as it is the practice in most
developing and developed countries of the world.

To divert attention from the argument that an increment in the
VAT rate would fuel high cost of goods and services, government has disclosed
that proceeds would be used to fund part of the N1.5 trillion required to
sponsor the police reform agenda, aimed at strengthening the nation’s security
system.

Mrs. Omoigu-Okauru said the plan to hike the VAT rate is not
only part of government’s effort to help boost revenue profile, but also a
strategic attempt to create an environment that would be conducive for
businesses.

Like VAT, like other
taxes

The hike in VAT is coming at a time when other taxes are being
increased in the land.

With the recent proposal by the Federal Roads Maintenance Agency
(FERMA) for the reintroduction of fuel tax to the petroleum products pricing
template, consumers’ woes are likely to multiply, as they would be paying more
for fuel at the pump in the near future.

Besides, the Nigerian Electricity Regulatory Commission (NERC),
the regulatory authority in the nation’s power sector, last Thursday, gave
indications of an impending upward review of electricity tariffs under the
multi-year tariff order (MYTO), which came into effect since 2008.

The review, according to Imamudeen Talba, NERC Sole Administrator,
expected to be implemented in the next couple of months, would feature
adjustment in the 2010 tariff level of N8.50 per kilowatt hour (kwh) of
electricity.