The Senate on Thursday passed the Finance Bill, 2019, despite the public outcry that greeted some aspects of the proposed law particularly the increase in the Value Added Tax. From 5 per cent to 7.5 per cent.
Even in the upper legislative chamber of the National Assembly on Thursday, senators were divided over the increase in VAT, as some of them insisted that it would worsen poverty in the country.
But in spite of dissenting voices, the Senate went ahead to pass the bill, including the aspect that deals with VAT.
Groups, including the Nigeria Employers Consultative Association, had faulted the planned increase in VAT. The Director General of NECA, Mr. Timothy Olawale, had said it was not good for the real sector.
In the Senate, some senators warned that the inclusion of the VAT hike in the Finance Bill would worsen the suffering and pains Nigerians are currently experiencing.
The bill seeks an amendment to Nigeria’s tax laws.The passage of the bill was sequel to the consideration of the report of the Senate Committee on Finance.
President Muhammadu had in October submitted the bill with the 2020 budget. Among others, the bill seeks amendments to Companies Income Tax Act; Value Added Tax Act; Customs and Excise Tariff; Personal Income Tax; Capital Gains Tax Act; Stamp Duty Act, and the Petroleum Profit Tax Act.
Explaining the bill, the Chairman of the Committee, Senator Olamilekan Adeola, said it specifically sought to amend Nigeria’s tax provisions.
He said the legislation would make the taxes more responsive to the policies of the Federal Government, among other things. Adeola added that the amendment and passage of the Finance Bill would enhance the implementation and effectiveness of government’s tax policies.
He said the initiative to reform the tax system and the proposed modifications to the fiscal rules around taxation were clearly aimed at creating an enabling business environment. He said it would minimise the tax burden for Micro, Small and Medium Enterprises.
According to Adeola, the bill also introduced tax incentives for investment in infrastructure and capital markets.He added that the bill when signed into law by the President, would support small businesses in line with the ongoing “Ease of Doing Business Reforms” and raise revenues for the Government.
President of the Senate, Ahmad Lawan, said the bill would streamline the tax system in Nigeria and enable the Federal Government to get revenue for the provision of services and infrastructure to the citizens of this country.
He said, “What we have done is very significant because this is to ensure we not only have credible and reliable sources of funding for the 2020 budget, but also for subsequent activities of government.
“The revenue generating agencies will have to sit up. The National Assembly, particularly the Senate, will be mounting a lot of oversight on the revenue generating agencies.
“If they have targets, we must ensure they meet these targets. What we intend to do is to engage the revenue generating agencies on a quarterly basis to evaluate their performance on revenue generation, and to identify if there are challenges and how we can achieve better outcomes.
“I believe what we have done is not to put tax burdens on the ordinary people. What we have done is to create more revenues to provide services and infrastructure for Nigerians, including the ordinary people.This exercise was done in a bi-partisan manner, and that is what we are known for,” Lawan said.
VAT hike inclusion in bill’ll increase poverty – Senators
But Senator Gabriel Suswan, in his contribution, said the bill to raise revenue for the Federal Government would deliver shocks to the people. He asked the Federal Government to provide social safety net for the masses.
The Benue State senator said Nigerians would be taken by surprise if the Senate went ahead with the amendment.
He advised the Federal Government to provide social programmes that would soften the effect of the increase.
He said, “ I am concerned about the issue of VAT, some of the amendments in the Value Added Tax no matter how you look at it is going to affect all Nigerians. What I suggest is for the Federal Government to create some social safety nets.
“The safety nets should ameliorate the pains that the people might go through as a result of the increase because it is coming as a shock to the people and as their representatives, we have to speak on their behalf.
“Some of the amendments sought here are on the tax revenue and to increase it, no matter how you see it here, this is something that is going to affect all Nigerians.
“What I would have expected, I do not know whether that is in the offing, is that the Federal Government should also in the same vein create a social safety net that will ameliorate the pains people are going to go through. This is a shock. People are not used to it and it comes so sudden,”
Also, the Minority Leader, Enyinnaya Abaribe, disagreed with the increase in VAT. He said that Nigerians were already suffering.
He said, “I can see that rate of Value Added Tax has been changed. We feel that the rate of tax should be left as it is. Nigerians are suffering too much already.”
Senator Abba Moro said there was no justification for an increase in VAT. He said, “I understand that the amendments are due to lack of revenue, but the problem is not because we don’t have the revenue but because our revenues are not being properly managed.
“I don’t think there is any justification of an increase in VAT from 5 per cent to 7.5 per cent. We don’t create problems in attempting to solve a problem, what we need is policy implementation and proper management of our revenue.
Moro said the challenge with revenue in the country was poor management and not the lack of it.
But Senator Ibikunle Amosun said it was time for tough decisions that would improve the economy to be taken.
Amosun backs bill, says economy requires tough decisions
He stated, “Governments are no magicians and you cannot give out what you do not have. Every day, we complain about our infrastructure. These are genuine complaints. If we do not have the necessary revenue, we cannot get good roads and stable power supply.”
The Deputy Senate Whip, Orji Uzor Kalu, said, “The bill is for the welfare of Nigerians. It will only affect luxury goods.”
Leader of the Senate, Senator Abdullahi Yahaya, in his lead remarks at plenary, faulted the increment tax regime from 5 per cent to 7.5 per cent.
He argued that the Nigerian economy had suffered a serious setback due to lack of revenue to fund the budget.
Abdullahi said the bill should be viewed as a revenue-generating tool for better economy than from partisan view.
He said, “The issue of the economy is an issue beyond politics. Whether it is the APC today or the PDP tomorrow. We have to come out and think of how to improve it.The major problem of the Nigerian economy is revenue. This is a N140tn economy but hardly raises N8tn of revenue from the economy.”
He said the lack of revenue had been a major reason government in the past and present had challenges in providing infrastructure to support and sustain the economy.
He maintained that while he remained a member of the APC, it was important to critically look at the amendments and make them serve the interests of Nigerians.
Senator Ifeanyi Ubah said the public hearing did not have representatives of major oil producers and petroleun marketers.
He said, “I need to draw your attention to the amendment to the Petroleum Proflt Tax Act, It will be so bad for Nigerians, the industry is not growing, downstream and upstream.
“Looking at the PPT, it is going to add more pains to Nigerians, I am of the opinion that it must be reviewed. I want to correct the committee, there was no representation from the industry in this public hearing.”
Ubah said the increment in the petroleum tax would increase the pains of Nigerians, noting that the petroleum industry was not developing.
He said, “Let us be reminded of the motive and agenda of the 9th Senate which is to create a law that works for Nigeria. The Petroleum Profit Tax Bill we can understand that petroleum is an important aspect of our livelihood in Nigeria and 60 per cent of our revenue in Nigeria is channelled towards importation of petroleum products.
“The increase in the petroleum tax will be so bad for Nigerians because the industry is not growing, 97 per cent of petroleum imports is being controlled by the NNPC.
“The increment will add more pains to Nigerians and I want it reviewed , let me also note that there was no representative from the oil industry that attended the open debate of the committee.”
Besides criticism by some senators, some civil rights groups also berated the Senate for approving VAT hike from 5 per cent to 7.5 per cent.
The Executive Director, YIAGA Africa, Samson Itodo, in an interview with one of our correspondents, said, “The gestation period of the Bill passed by the National Assembly has become huge source of concern. Two issues are worthy of interrogation.”
He asked, “What’s the extent of due diligence and depth of work on the bill? What is the level of public participation in the bill consideration?”
Ninth assembly has positioned itself against the people – CSO
Also, a civic group, United Global Resolve for Peace, described as anti-people, the financial bill and VAT increase by the Senate.
The UGRFP Executive Director, Shalom Olaseni, said the ninth assembly appeared to have positioned itself against the people by its action.
He said, “The ninth National Assembly seems to have positioned itself to go against the ideals of constituency representation in hurriedly passing those two bills which have been publicly decried for being insensitive to the realities of ordinary Nigerians.
“Who stands to benefit? Definitely not the people. The speed with which the bills are enjoying passage simply because they are executive bills goes to show that when our legislative priorities are right, progress can be made.”
Senate failed to consider memoranda submitted – NECA
On his part, NECA Director-General, Mr Timothy Olawale, said that the passage of the Financial Bill would result in increase in prices of goods and services.
Olawale, who described the action of the Senate as a rude shock, as the Senators failed to consider memoranda submitted by Nigerians on the bill before passing it.
He said, “It was a rude shock to the generality of Nigerians that the ‘people’s Senate’ without due process of going through memoranda submitted and that are still pouring in on the financial bill passed the bill to increase VAT , excise duty and stamp duty. Nigerians by implication are now to pay more for goods and services.
“Government, especially the National Assembly members, have condemned the citizenry to a life of servitude to fuel their appetite for easy life.
“The National Assembly is by implication asking Nigerians that are already passing through tough times economically to prepare for a more harrowing experience with eroded purchasing power in the face of spiral rises in inflation.
Govt not pro-masses – NECA
“Unfortunately, government’s idea of wealth creation is not pro-masses, adding to the burdens of the poor through more levies and taxes.”
Olawale said the only succour left was for Nigerians to hope the pro-people disposition of President Buhari would rise to the defence of the people by declining assent to the bill.
He, however, lamented this might be a tall order as the Bill emanated from the Presidency in the first instance.
Olawale said that besides the erosion of the masses purchasing power, businesses were also going to be adversely impacted- the shelf lives and inventories of goods would skyrocket, prices of goods would increase and the burden passed to consumers.
VAT increase ‘ll hurt citizens, economy, says LCCI
The Lagos Chamber of Commerce and Industry condemned the increase in VAT.
The Director-General, LCCI, Mr Muda Yusuf, in an interview with The PUNCH, said, “The upward review of VAT at this time will hurt businesses, the economy and citizens.
“Many businesses are currently grappling with high production and operating cost which has made sustainability difficult for many enterprises.
“There is also pressure of costs driven by high interest rate, huge logistics cost, high energy cost, and high regulatory compliance costs.
“Businesses often have difficulties in passing these additional costs to customers because of the weak purchasing power by many of the citizens.”
Yusuf noted that the LCCI had advocated that rather than increase tax rates, the government should broaden the tax base by bringing into the tax net numerous persons and enterprises that were not tax compliant.
He said for an economy contending with high unemployment, “we should be talking about economic and fiscal stimulus at this time, not an additional burden of tax.”
Yusuf added that in order to ensure fiscal sustainability of the government, it was important to address issues of the cost of governance.
He said, “The recurrent expenditure of government is too high, cost of governance is humongous. There is need to prune both overhead and personnel costs.
“The reform of the oil and gas sector would also boost revenue through the attraction of new investments.”