Relevant stakeholders in the financial sector on Tuesday disagreed with the Federal Government over the proposed increase in the Value Added Tax (VAT).
This is just as the stakeholders asked the federal government to implement only N50 stamp duty charged on electronic money transactions amounting to N100,000 and above.
This was the outcome of a public hearing on the Finance Bill 2019, organised by the National Assembly Joint Committee on Finance held in Abuja.
But members of the House of Representatives committee on Finance, chaired by James Faleke, on Tuesday, boycotted the joint public hearing. Also, the Speaker, Femi Gbajabiamila, who was mentioned as special guest, did not attend the event. The Senate President, Ahmad Lawan was represented at the event by his deputy, Ovie Omo-Agege.
The public hearing was jointly organised by the Senate and House of Representatives before the feud between the Senators and members was laid open.
National Assembly sources said the Senate and Reps finance committee members disagreed, leading to the boycott. The source said some lawmakers in the Lower Chamber had accused the Senate of being ‘rubber stamp’ to the executive hence their refusal to be present to the public hearing.
The objectives of the bill include promoting fiscal equity by mitigating instances of regressive tax inversion, and forming domestic tax laws to align with global best practices among others.
The finance bill passed the second reading in Senate two weeks ago. Senators deliberated on the bill and recommended a public hearing session to collect views of relevant stakeholders on it.
During the public hearing on Tuesday, the stakeholders registered their grievances on the hike in VAT because, according to them, it would dislodge consumption and reduce the rapid growth of the economy.
President Muhammadu Buhari had while presenting the 2019 budget of N10.33 trillion to a joint session of National Assembly, submitted a draft Finance Bill that proposed an increase of the VAT rate from 5% to 7.5%.
Buhari has said the 2020 Appropriation Bill was based on the new VAT rate to draw additional revenues to be used to fund health, education and infrastructure programmes.
States and Local Governments share 85% of all VAT revenues, which Buhari said was expected to lead to greater quality and efficiency in their spending.
The VAT Act, however, exempted pharmaceuticals, educational items, and basic commodities, which exemptions were to be expanded under the Finance Bill, 2019.
Specifically, Section 46 of the Finance Bill, 2019 expands the exempt items to include brown and white bread; cereals including maize, rice, wheat, millet, barley and sorghum; fish of all kinds; flour and starch meals; and fruits, nuts, pulses and vegetables of various kinds.
Other exempted items include roots such as yam, cocoyam, sweet and Irish potatoes; meat and poultry products including eggs; milk; salt and herbs of various kinds; and Natural water and table water respectively.
However, during the public hearing, the stakeholders stressed the need for the federal government to harmonise taxes, levies and fees payable by items and businesses in the country to attract more investment.
The harmonisation of taxes, according to the Manufacturers Association of Nigeria (MAN), would translate to higher productivity and generate more tax revenue for the government in the medium and long term.
The association’s representative, Rasaq Okulaja, noted that Section 4 of the proposed amendment to the bill aimed at substituting the Value Added Tax (VAT) from 5% to 7.5% would reduce growth in the economy.
Okulaja opined that the definition of stamp duty on electronic money transfer with the attendant N50 charge for transaction amounting to N10,000 would no doubt constitute a contradiction.
“This as it will reverse the Government cashless policy that is gaining ground. However, if it must be implemented, the N50 stamp duty should be charged on transaction amounting to N100,000 and above.”
In his submission, Chairman of Oil Producers Trade Section (OPTS), Mr Paul McGrath said that Sections 35 and 38 of the bill expanded the definition of Services for VAT purposes and introduced VAT Reverse Charge on Imported Services.
He said that the provisions had broadened the definition of services. “With this expanded definition, invoices and similar transactions will be subject to Nigerian VAT of 7.5 percent. Beneficiaries of such services will now be required to self-account for VAT.”
“Again, OPTS recommends the adoption of the globally accepted industry practice of exempting intra-company atcost services,” he stated.
Also, Julianah Aribo who appeared on behalf of legislative advocacy for sustainable development goals posited that the bill should increase excise duty on cigarettes, alcohol and other harmful items.
Earlier, in his remarks, Chairman of the Senate Committee on Finance, Senator Solomon Adeola explained that the bill, if passed, would introduce sweeping changes in the nation’s tax policy.
“We believe that the initiative to reform our tax system is laudable and the proposed modifications to the Fiscal rules around taxation are clearly aimed at creating an enabling business environment and alleviating the tax burden for Micro, Small and Medium Enterprises (MSMEs).”