LCCI, Others Kick as Senate Passes Finance Bill
•Restates opposition to increase in VAT
Deji Elumoye in Abuja and Dike Onwuamaeze in Lagos
The Senate yesterday passed the Executive Finance Bill, which was sent to it earlier this month by President Muhammadu Buhari for consideration amid controversy over the 50 per cent increase in Value Added Tax (VAT) from five per cent to 7.5 per cent.
The passage is coming two days after the upper legislative chamber held a public hearing on the bill where stakeholders including oil producers, Manufacturers Association of Nigeria (MAN) and Institute of Chartered Accountants of Nigeria (ICAN) objected to some provisions of the bill.
The Lagos Chamber of Commerce and Industry (LCCI) has also kicked against the passage of the bill.
At yesterday’s plenary, the increase in the percentage of Value Added Tax (VAT) paid on luxury goods by 50 per cent generated heated debate with Senate Leader, Senator Yahaya Abdullahi, cautioning his colleagues not to politicise debate on the bill, adding that necessary machinery needs to be set in motion to grow the economy.
Yahaya, in his lead debate before the Senate dissolved into the Committee of the Whole to pass the 56 clauses of the financial bill, called on his colleagues to look dispassionately at the bill seeking to raise the revenue accruable to the federal government dispassionately.
According to him, the Nigerian economy has suffered serious setback due to lack of revenue to fund the budget, adding that despite having a huge economy, it is irreconcilable that Nigeria could hardly raise N8 trillion to fund its budget.
Abdullahi said the bill should be viewed as a revenue generating tool for better economy than from partisan viewpoint.
“The issue of the economy is an issue beyond politics. Whether it is APC today or PDP tomorrow, we have to come out and think of how to improve it,” he stated.
The Senate leader’s submission that revenue was a major challenge to the country was, however, faulted by Senator Abba Moro who said the challenge with revenue in the country was poor management and not the lack of it.
Also contributing, Senator Gabriel Suswam said the bill to raise revenue for the federal government would deliver shocks to the people.
“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, 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,” Suswam stated.
The Chairman of the Senate Committee on Finance, Senator Olamilekan Adeola, however, countered Suswam, saying that the VAT increase is not intended for the poor but the rich who patronise luxury goods at the airport, hotels, among other places.
“If you decide to eat pounded yam in your house, you won’t pay any tax but if you decide to take the pounded yam in a luxury hotel, you will pay VAT on your purchase,” he added.
The passage of the bill, which seeks an amendment to seven old tax laws was sequel to the consideration of the report of the Senate Committee on Finance.
Presenting the report, Adeola said the bill sought to amend Nigeria’s tax provisions and make them more responsive to the tax policies of the federal government, among other things.
He added that the amendment and passage of the bill would enhance the implementation and effectiveness of government’s tax policies.
According to him, the initiative to reform the tax system and the proposed modifications to the fiscal rules around taxation are clearly aimed at creating an enabling business environment aimed at minimising the tax burden for Micro, Small and Medium Enterprises (MSMEs).
Senator Adeola added that the bill, as amended, would promote fiscal equity by mitigating instances of regressive taxation, as well as introduce tax incentives for investment in infrastructure and capital markets.
When signed into law, the bill would support small businesses in line with the ongoing “Ease of Doing Business Reforms” and raise revenues for the government.
Speaking after the clause-by-clause consideration of the bill, Senate President, Dr. Ahmad Lawan, said the bill’s passage was intended “to ensure that we (National Assembly) streamline the tax system in Nigeria and get revenue for government to provide services and infrastructure to the citizens of this country.
“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.”
The laws amended under the Finance Bill passed yesterday are: Companies Income Tax Act, Cap C21 2004 (as amended to date); Value Added Tax Act, Cap VI, LHN 2007 (as amended), and Customs and Excise Tariff (Consolidation) Act, Cap C49, 2004.
Others are: Personal Income Tax Cap P8, LFN 2007 (as amended); Capital Gains Tax Act Cap C1, LFN 2007; Stamp Duties Act Cap S8, LFN 2004, and the Petroleum Profit Tax Act (PPTA) 2004.
LCCI Warns of Effects on Consumers, Businesses
However, the LCCI has warned that the upward review of VAT would have adverse effects on consumers and businesses because of the negative impacts it would have on sale of goods, firms’ profit margins and weakening of the consumers’ purchasing power.
LCCI Director General, Mr. Muda Yusuf, told THISDAY that members of the Organised Private Sector (OPS) were not given the chance to air their views on the VAT review before it was approved by the Senate.
“This is not good for the spirit of democracy and democratic process. At least, those that would be affected directly by the bill would have been given an opportunity to have a say in its content. It even took time for us to have a glimpse of the draft of the bill.
“If you take into consideration the challenges investors and enterprise owners are going through even before the review of VAT such as multiple taxations, you will know that the review will make things more difficult for businesses in the country,” he stated.
He, however, said it was still uncertain the impact it would have on the flow of Foreign Direct Investments (FDIs) into the economy.
“It will take time to see its impact on FDIs, which will depend on their business model and the sectors they want to invest in,” he said.