The Economic Community of West Africa States (ECOWAS) is canvassing for an increase in the Value Added Tax (VAT) on luxury items like perfume, wine and other alcoholic beverages, insisting that Nigeria remains the least VAT paying country in West Africa.
Director Domestic Tax, ECOWAS, Tiemtore Salifou, who made the appeal on the sideline of a two-day regional seminar on problems of tax transition in West Africa, however suggested that the increase should be on products that will not impact positively on common Nigerians.
While emphasising that there was no economic wisdom in Nigeria paying less VAT than Niger Republic, he however, suggested VAT increase on items like hospitality industry, expensive perfumes and wines among other imported products.
“The seminar is to talk about tax transition. We have a train of liberalisation which has impacted on West Africa because during the negotiations, we have to reduce the import taxation and Custom duties.
“Most of the goods are entering the countries free without paying Custom duties yet government need money to finance development. So, we need to strengthen the capacity of internal revenue to mitigate what we are losing from import duties.
“You also know that VAT is a revenue earner to the domestic tax authorities and we need to strengthen how to improve on ways of collecting VAT for the economy to get more revenue for the government to generate employment especially in Nigeria where the attitude to VAT collection is very low compared to what obtains in other west Africa countries.
“In Nigeria, we have only 7.5 per cent VAT unlike in Ghana where it has gotten to the level of 15 per cent and other countries we have 19 to 20 per cent. This is common in other parts of the world. There are a lot of things to do here in terms of improving the capacity of tax administration and review of the law so that Nigeria can be on the same pedestal with other West Africa countries.
“Our mission is to assist the countries in this process. Though we are aware that it has political implications, these countries need to understand that it is a way of improving resources to address developmental issues,” he said.
Speaking further, he said: “On the tax leakages, if you go to a country like Ghana, Cote I’voire, import duty is giving them 30 per cent of revenues. But, compared to Nigeria, I don’t think import duties is contributing even five per cent of government’s revenue.
“Because it is very low, there is a lot to do in this regard to increase revenue for government to what is happening elsewhere but I don’t see it happening because Nigeria is an oil producing country.
“The government and relevant authorities need to explain to the people that the oil money could be used for other purposes as it is done in other oil producing countries like Norway. Nigeria must put somethings in place to ensure that they take certain category of people into account especially the low revenue earners. They should not also put VAT on certain products very important to the common citizens.”
On how the federal government should go about especially as Nigerians are already complaining about 7.5 per cent, he said: “There are some products we can increase VAT on without impacting on the lives of the normal Nigerians.
“I am talking about the hotels, perfumes, wines and certain products for the rich. I don’t think it will have any impact on the common people if government increases tax on them. The government has to make a choice. I don’t see the reason why a country like Niger Republic will implement 19 per cent VAT and Nigeria cannot.
“What it means is that there is something wrong somewhere. Let us imagine Nigeria without oil, what are they going to survive on. Nigerian government needs political will and the buy in of Nigerians to implement it. But more importantly, there must be transparency in the usage of the funds realised from the increased VAT.”