New VAT: Stakeholders Demand Exemption, Waivers, Infrastructure
Following the decision of the Federal Government to begin implementation of increased VAT regime of 7.5 per cent, operators, stakeholders and experts have demanded waivers and exemptions from the government.
The stakeholders who spoke to our correspondents in separate telephone interviews also demanded improved infrastructure and single-unit credit schemes.
According to them, except these demands are met, it will be difficult for some sectors of the economy to thrive in the new tax regime.
Exclude investments from VAT
The Chairman, Association of Securities Dealing Houses of Nigeria, Chief Patrick Ezeagu, said VAT was meant to be on consumption and not investments.
He said stockbrokers were reviewing the new tax law and its implications to know how to better approach the government to tackle the issue.
He said if the government must encourage people to invest, they should be excluded from certain taxes, especially since dividends were already being taxed.
Ezeagu said, “We don’t want a situation where there would be multiple taxes that discourage investments. Let the government exclude anything investment-related from VAT.
“The government needs to believe in the capital market and use it for its funding requirements to bridge infrastructural deficit. This would bring discipline and ensure transparency in the way the funds are utilised.
“The revenue from increased taxes should also be used to support institutions supporting the market, such as the Securities and Exchange Commission, to achieving key development plans for the capital market.”
The Managing Director, Afrinvest Securities Limited, Mr Ayodeji Ebo, said the new tax law would cushion the impact of finance cost on companies.
He said it might also affect consumer demand.
Ebo stated that the Federal Government, following the increase in VAT, should work towards ensuring a cost- reflective tariff within the electricity space.
He noted that if that could be done, distribution companies could use the capital market to raise more funds.
The Chief Economist, Cordros Capital Limited, Wahab Mustapha, described the new Federal Government’s tax initiative as laudable.
He said with an increase in VAT, the revenue base of the government would be diversified, which would reduce its presence in the debt market and reduce cost of borrowing.
Spend more on mining, people’s well-being
President of the Mining Association of Nigeria, Alhaji Kabir Mohammed, urged the Federal Government to inject more funds into the mining sector, and initiate measures to attract serious investors.
Mohammed said, “There is nobody who will say government should not generate revenue. We are not necessarily against the increase in VAT.
“However, the government should also implement measures to cushion the impact of the increment.
“We want government to inject more funds into the mining sector.”
He suggested that the added revenue to be realised from the tax should be for the ‘general well-being’ of all Nigerians.
Similarly, the Chairman of the Association of Miners and Processors of Barite, Mr Steven Alao, stressed the need for prudent management of revenue generated from the tax.
Aviation to enjoy exemption
The President, Aviation Roundtable Initiative, Mr Gbenga Olowo, said airline tariff might not be affected by the new VAT as transport including aviation had been exempted and domestic airlines recently got the nod for the exemption.
Olowo said the Federal Government could however help the industry by boosting aviation economics.
He stated that this should be continually driven by strong private sector participation through private capital financing given the many constraints and varying demands on national income.
“The sector eagerly awaits the birth of strong flag carrier(s) along this noble perspective. Private capital investment in airlines and airports is necessary and sufficient condition for boosting aviation economics,” he said.
According to him, the government should also pay more attention to regulation and the ease of doing business.
Auto players demand single-digit credit
Auto industry players and experts asked the Federal Government to fast-track the establishment of auto credit scheme that could be accessed by vehicle assemblers, dealers and buyers.
The Deputy Managing Director, CFAO Motors, Kunle Jaiyesimi, and the Executive Director of the Nigerian Automotive Manufacturers Association, Remi Olaofe, canvassed this view in separate interviews with The PUNCH.
They said a single-digit interest loan scheme for auto industry operators and consumers would mitigate the effects of the 2.5 per cent VAT increase on the industry’s activities.
Olaofe said, “We’re talking about auto credit for everyone. The auto industry needs to be looked at differently from the standpoint of the vehicle assemblies, consumers and the buyers.
“They need a single-digit interest loan scheme. It’s not just about buying the vehicles; we need it for people that are also assembling the vehicles because they need a lot of support right now.”
Jaiyesimi said while the new finance law appeared to favour small-scale businesses, the high earners, who were major operators, should be assisted too, warning that to do otherwise would amount to laying a foundation for the collapse of the industry.
Waivers required to avoid housing crisis
The President, Real Estate Developers Association of Nigeria, Mr Ugo Chime, said the increase in VAT rate would further compound the real estate industry’s problem.
“The industry has not fully recovered from the recent economic recession,” he said.
Chime explained that with the increase, building materials prices would be reviewed upwards and could lead to increase in housing.
According to him, the end users will bear the brunt crisis.
He urged the government to consider the struggles of the industry and provide waiver where necessary so that Nigerians at the end of the housing pyramid would not be totally left out, thereby increasing the country’s housing crisis.
Spend VAT earnings to improve infrastructure – NUPENG, NECA
The Nigeria Employers’ Consultative Association and the National Union of Petroleum and Natural Gas urged the Federal Government to utilise the extra income to be generated from the increase in VAT and other taxes to improve infrastructure.
The Director-General of NECA, Dr Timothy Olawale, said the Federal Government would be earning an additional N550bn annually from the increase in VAT.
He advised that the fund should be judiciously used for the benefit of Nigerians.
Spend on impact projects
The General Secretary, NUPENG, Afolabi Olufemi, on the hand, urged the government to utilise the additional revenue in improving the road, power, education and health infrastructure in the country.
By: Rasheed Bisiriyu, Samuel Awoyinfa, Nike Popoola, Ifeanyi Onuba, Anna Okon, Ihuoma Chiedozie, Maureen Ihua-Maduenyi and Feyisayo Popoola