Increasing VAT by 50% good but ill-timed – Dr. Ogbonna

BY EMEKA EJERE

Immediate past executive chairman of Abia State Internal Revenue Services (AIRS), Dr. Udochukwu Ogbonna, has noted that the upward review of value added tax (VAT), from 5 per cent to 7.5 percent, though a lofty idea, is coming at a wrong time.

Dr. Ogbonna stated this in Lagos on Thursday, at the on-going two-day tax seminar on ‘Finance Act 2019’, organized by Okwudili Ijezie & Co. (Chartered Accountants)

President Muhammadu Buhari, had on Monday, January 13, signed the Finance Bill, which, among others, seeks to increase the VAT from 5 per cent to 7.5 per cent.

Announcing the move on his verified Twitter account, the president had stated,

“I am pleased to announce that this morning I signed into law the Finance Bill, 2019.

“We introduced the bill alongside the 2020 budget, to reform Nigeria’s tax laws to align with global best practices, support MSMEs in line with our Ease of Doing Business Reforms, incentivize investments in infrastructure and capital markets and raise government revenues.” the tweet reads.

Speaking on the topic, “Finance Act 2019: Understanding Underlying Challenges & Procedures To Counter Such Challenges”, Dr. Ogbonna argued that although the VAT in Nigeria is below the world average, the federal government should have made the economy more vibrant before increasing VAT which, he said, will lead to increase in prices of goods and services.

He, however, explained that if Nigerians want to be sincere to themselves, “VAT is not supposed to affect everything.”

Dr. Ogbonna, who urged the tax authorities to widen the tax net, regretted that up to 50 per cent of taxable adults and businesses are not paying taxes.

“If the tax net is increased, there will be no need to increase taxes”, Ogbonna said.

On his part, Dr. Patrick Modilim, former deputy general manager, Zenith Bank Plc who spoke on the opic: “Finance Act 2019: An Overview”, noted that it is laudable that small businesses will be exempted from company income tax, which is 30 per cent of the profit earned, but expressed fear that it may lead to high rate of manipulation.

Modilim pointed out that the new Act creates an opportunity for the insurance companies to thrive because they can carry forward their losses almost indefinitely.

“This was not the case previously when they were restricted to carry forward such losses for only four years. Now, life and non-life insurance businesses will no longer be liable to special minimum tax provision”, he said.

Earlier in her keynote address, president/chairman of council, Chartered Institute of Taxation of Nigeria (CITN), Dame Olajumoke Simplice, described the new Act as an end to sitting on the fence for too long.

“I believe whatever we come up with at this seminar today will be sent to the Ministry of Finance for deliberation”, she said.

This is the first time since the return of democracy in 1999, that a federal budget is accompanied by the passage of a Finance Bill specially designed to support its implementation and to create an enabling environment for business and investment by the private sector.