Fowler Didn’t Call For 50 Percent VAT Increase – FIRS

The Federal Inland Revenue Service (FIRS) has dismissed media reports quoting its Chairman, Mr. Babatunde Fowler, as suggesting an increase in the rate of Value Added Tax (VAT) from five per cent to 50 per cent.

Various media outlets, Tuesday, quoted Fowler as recommending a hike of that proportion during a meeting with members of the Senate Finance Committee at the 2019-2021 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (PSP) in Abuja.

In a statement, FIRS said what Fowler recommended is an increase in the number of individuals and business entities paying VAT.

The Service also rebutted reports that Fowler called for an increase in the rate of Companies Income Tax (CIT), stating that what the FIRS boss suggested is a reduction in CIT rate for small businesses, so as to improve compliance.

The statement, signed by Wahab Gbadamosi, FIRS Director, Communication and Servicom, said while Fowler suggested an increase in VAT rate by the end of the year, it was not by 50 per cent.

Rather, the FIRS explained in the statement, Fowler promised improved collection in CIT, Petroleum Profits Tax, (PPT) and VAT in 2019 relative to the collection performance of the Service in 2018.

In 2018, the FIRS collected the sum of N1.1 trillion in VAT, N1.42 trillion in CIT and N2.4 trillion in PPT.

Asked by Senator John Enoh (Chairman, Senate Committee on Finance) how the FIRS aims to surpass the record revenue collection of N5.32 trillion last year in view of the fact that it has been given a target of N8 trillion for the current year, FIRS said Fowler responded that the FIRS has increased VAT collection over the last three years by over 25 per cent.

“In terms of whether there should be an increase, I believe there should be an increase. One issue about taxation is that it should be fair to all. We have discovered after VAIDS (Voluntary Assets and Income Declaration Scheme) that a high percentage of businesses are collecting VAT and not remitting.

“We’ve also tried to address this issue. We’ve issued new VAT certificates. We have appealed to the public that if they are charged VAT and they are not sure it had been remitted, they should contact us. We even gave a small promotion that for every 25 names that they give to us, we give them a little gift either a power bank or something to show appreciation. But that aside, we are also on the streets. We have a team called FEETT (Federal Engagement and Enlightenment Tax Teams) going around to confirm that businesses are registered for VAT.

“I believe with the substitution of over 50,000 bank accounts that we just started this week, I am sure that those businesses that have been collecting VAT and not remitting the same or not remitting any tax payment are beginning to ensure that the level of tax compliance is improved.

“I believe that by the end of this year, government and Nigerian people should be ready for an increase in VAT,” the statement quoted Fowler as saying.

The FIRS boss noted that many Nigerians travel to Ghana and other West African countries where VAT rates are much higher, adding that as the economy improves, there will be an increase in VAT and they should be ready for it.

He described the target of N8 trillion as challenging, but foresees an increase in the VAT collection rate of between 35 to 50 per cent this year because of improved enforcement activities.

Responding to a question by Senator Yusuf Abubakar Yusuf on why the CIT rate has remained at 30 per cent, Fowler said: “My personal opinion is that the rate of CIT should remain at 30 per cent, to make sure that we do not reduce the tax rate, without getting others who are not in the tax net into the tax net.

But for small businesses, it’s a discussion we are having with the Ministry of Finance for people who are having a certain turnover. I believe that that can be reduced to may be 20 per cent to promote the small-scale businesses. But in terms of immediate reduction, I think we should try and stabilize to ensure a 90 per cent compliance of those in the tax net.”