The Nigerian Economic Summit Group has cautioned that the federal government might encounter revenue deficits if it doesn’t raise the value-added tax rate as part of the current tax reform efforts.
Dr. Tayo Aduloju, who serves as the CEO of NESG, shared this statement at an interactive media event that took place over the weekend in Abuja.
He stressed that although changes to the VAT system are crucial, keeping the present VAT rate unchanged might result in considerable financial losses for the government.
Addressing the matter, Aduloju stated, “If there were no increases in rates, it would imply that the government could potentially miss out on additional income.”
He pointed out that the continuous fiscal and tax reform initiatives are designed to tackle the intricacies of the taxation framework while guaranteeing that the government continues to collect enough funds to back its extensive budgetary objectives.
Aduloju stated that the ongoing tax reform needs to find a equilibrium between streamlining the taxation framework and raising the Value Added Tax rate to ensure consistent revenue generation.
As he stated, merely decreasing tax amounts without modifying the VAT rate might undermine the government’s income foundation.
He stated, “Should we succeed in reforming the VAT system and manage to delay the rate increase for three years, it would indeed be considered a victory. This achievement would demonstrate our effectiveness promptly, encouraging additional businesses to invest in Nigeria.”
The head of NESG mentioned that although tax reform is essential for decreasing the number of taxes, it should not undermine revenue collection.
Aduloju emphasized the importance of Nigeria unlocking investment opportunities to boost revenue generation even further.
He disclosed that the nation possesses ample resources which could draw foreign direct investment if free from legal, regulatory, and policy obstacles.
Additionally, Aduloju advocated for improved collaboration between monetary and fiscal policies to address inflation, especially issues stemming from elevated energy prices.
He contended that energy security continues to be a crucial element affecting inflation, as inefficiencies within the downstream petroleum industry have led to ongoing price increases.
The Nigerian Labour Congress and the Nigeria Governors’ Forum have voiced their opposition to the suggested rise in Value Added Tax (VAT) rates, as detailed in the Federal Government’s Tax Reform Bills. They cautioned that this step might exacerbate the financial struggles currently endured by citizens of Nigeria.
Additionally, the House of Representatives kept the Value Added Tax, VAT, at 7.5 percent and did not approve a gradual rise to 15 percent by the year 2030.
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