The Senate Committee on Finance has invited the Minister of Finance, Hajia Zainab Ahmed, and the Chairman of the Federal Inland Revenue Service, Babatunde Fowler, over the proposed plan by the Federal Government to increase the Value Added Tax, from five per cent to 7.2 per cent.
The minister and the FIRS boss are expected to throw more light on the reasons for the proposed increase.
The finance minister had, after the Federal Executive Council Meeting on Wednesday, announced the hike.
However, the Chairman of the Senate panel, Senator Solomon Adeola, announced the invitation of the two senior officials on Thursday through a statement by his Special Adviser, Chief Kayode Odunaro.
The statement did not indicate the date that the officials would appear before the Senate panel.
Adeola noted that the proposed increase in VAT had generated mixed reactions among Nigerians on its possible effects on living standard and the economy.
He said, “We are glad that the Minister of Finance indicated that the VAT Act will have to be amended for the increase to take effect. But we are concerned about the current economic situation of the country as it affects the generality of the people,” Adeola said.
He stated that the interaction with the two key officials of the Federal Government would form part of the basis for possible amendments to the VAT Act.
Meanwhile, the Nigeria Labour Congress and the Nigeria Employers’ Consultative Association on Thursday opposed the planned VAT increase, saying it would neutralise the newly-approved N30,000 national minimum wage.
While the NLC said the increment sought to erode whatever purchasing power the national minimum wage may bring, NECA cautioned against the timing of the announced increase.
The General Secretary of the NLC, Emma Ugboaja, and the Director-General of NECA, Timothy Olawale, stated these in separate reactions in Abuja.
Ugboaja said, “We reject the increase as it clearly seeks to erode whatever purchasing power the minimum wage may bring. We see it as a move not well thought through with the welfare of Nigerian wage earners in mind.
“Its impact on Nigerian manufacturers for job creation and retention will be nightmarish. It is clearly insensitive to the plight of the ordinary Nigerian. What the government needs to do is to widen the tax net and get people to pay tax and not to overtax those that are in the net as of now.”
Also, Olawale said, “The benefits of the recently-signed National Minimum Wage of N30,000 would be neutralised by the proposed increase in the VAT, further reduce the purchasing power of the citizens, leading to increase in prices of goods and services, resulting in upward movement of the inflation rate, and further contraction of the economy.”
On businesses, he lamented that since the purchasing power of the citizens would have been reduced, sales of goods and services will reduce and inventories for business will be high, saying the situation could lead to closure of businesses that ought to be supported by government in reducing the country’s alarming unemployment.