INCREASING VAT TO PAY WAGES, ABSOLUTELY WRONG!
L-R; minister of Finance, Zainab Ahmed and Governor CBN, Godwin Emeifele
Trek Africa Newspaper
The Federal Government has approved an increase in the value added tax from 5% to 7.5%. ‘This is important because the federal government only retains 15% of the VAT, 85% is actually for the states and local government and the state need additional revenue to be able to meet the obligations of the minimum wage’ were the words of Zainab Ahmed, the minister of Finance, Budget and National Planning at the Federal Executive Council meeting on 11th September where she announced the new development.
Having decided its own payment model, the Federal Government is in talks with the Nigeria Labour Congress to harmonise the process. It can be safe that it is fully prepared to commence the new minimum wage. But the same cannot be said about states. They are just too poor to meet their recurrent expenditure in form of salaries, pensions and other emoluments. Many are deep in debt. Some previous governments have set the new ones up for failure. The woes of the states have been further compounded by federal government’s pronouncement to start the deduction of bailout funds from source starting from this month. There seem to not be a way out for these states to pay!
The Federal Government comes up with a solution. The cheapest route is to increase value added tax. This is because 85% of revenue from this source goes to states. A 2.5% rise seems good enough to bolster the coffers of the 36 federating units. But this is a legendary ‘rob Peter to pay Paul’ situation, for how can you collect from all of us to pay a few of us. Value Added Tax is a tax that is payable on goods and services consumed by individuals, business organizations and government agencies. This is overburdening the lean purse of the population. Prices of commodities will soar and even persons who get the salary may soon find out that it does not make sense after all. This is not a tidy process.
Back to states. It is one thing to get the revenue, it is another to direct it to the purpose for which it is collected. If the states could not be ingenious to generate internal revenue and the FG has helped them, they should do the needful to work out work out the modalities for the new wage structure. It will be foolhardy for state chief executives to revel in ostentatious spree with this new development.
