Nigerian -opposition to increase of VAT.

(This Day-Lagos)
By most accounts, the last has not been heard of the federal government's plan to impose on Nigerians stiffer consumption tax, otherwise known as the value added tax (VAT).
The last time the government made moves to raise the tax from five per cent to 10 per cent, Nigerians, including this newspaper, opposed it. We did so not because we did not believe in the right of government to tax people to fund development or welfare programmes aimed at improving the people's standard of living. Rather, most of the opposition stemmed from the apparent disconnection between high taxation in Nigeria and the people's welfare.
By almost every index of the social contract principle, successive Nigerian governments have failed substantially to account for the huge income that accrues to the nation from taxation and other sources. There is a mismatch between revenue collection and performance.
As it is, few Nigerians are therefore convinced that the government has any moral right to levy higher taxes on its people in the face of the incredible fiscal irresponsibility so rampant in public spending. Besides, not many people are convinced that the consumption tax is the first place to start if taxes must be raised at all. They believe that there are yet many loopholes in our income tax systems which make tax evasion, especially by the rich and super rich, quite rampant. A government that is determined to improve tax revenue ought therefore to start from there. By plugging the existing loopholes, a lot more income will be realized from personal and corporate income taxes.
However, it would appear that this thinking cuts no ice with the Federal Inland Revenue Services (FIRS) which has instead come up with a plan to raise the VAT by a whopping 200 per cent by the year 2009. In effect, Nigerians are expected to start paying 15 per cent VAT by then if this proposal is endorsed by the Senate. FIRS's justification for this proposal is that it would eliminate multiple taxation and reduce personal income tax.
Although it certainly makes sense to reduce multiple taxation and personal income tax, such promises had, however, not always been kept in the past. It is for this reason then that Nigerians tend to be skeptical about such plans. Many now see taxation in the country as a mere exaction where as taxes are supposed to be a means of improving social services. It is this disconnect between taxation and the people's welfare that makes any talks about increasing the tax level paid by Nigerians controversial. Few Nigerians are convinced that paying a higher VAT will necessarily lead to improved services.
In this instance, we think the government should not raise the VAT unless and until it has fully articulated how it would spend revenue accruing from it. In other countries, because of the sensitive nature of taxes, every planned increase in taxation, especially consumption tax, is usually preceded by government's elaborate explanation of how it will spend the revenue for the people's benefit. We expect no less from the Nigerian government.
The plan should therefore be shelved for now. What we expect the government do is to throw the issue open for public debate. It must not allow the FIRS to stampede it into imposing greater burden on Nigerians at a time when consumer prices are going through the roof. The challenge of the government for now should be to ensure the prudent use of existing revenues.