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Economist supports subsidy removal, disapproves VAT increment

Published on January 8, 2016 by   ·   No Comments

Petrol Station DPR Fuel ScarcityAn economist, Prof. Uche Uwaleke has advised against the recommendation by the Managing Director, International Monetary Fund (IMF), to increase Nigeria’s Value Added Tax (VAT).

Uwaleke told the News Agency of Nigeria (NAN), on Friday that an increase in VAT would result in violation of the principle of tolerable tax burden on Nigerians.

According to him, Nigeria has one of the highest poverty rates in the world and it will be unfair to compel the masses to increase their tax on consumption.

“ I am against any increase in the Value Added Tax this fiscal year.

“ I am aware there are those who argue that Nigeria has one of the lowest tax rates in the world, especially with respect to Value Added Tax which is currently at five per cent.

“Those who hold this view now find support in the views expressed by the IMF’s Managing Director.

“In a country where unemployment rate is on a steady increase with many youths unable to find gainful employment.

“Any increase in a consumption tax like the Value Added Tax will be a violation of the principle of tolerable tax burden.

Uwaleke however noted that the 2016 budget projection for VAT was not predicated on any increase in tax rate.

On the issue of subsidy removal, the Professor said, “ l am of the opinion that it should be removed, especially now that the international oil price is low.’’

According to him, the opportunity cost of subsidising fuel is very high and from what we have seen, it is one measure which has benefited only a few.

Uwaleke urged that the huge savings from fuel subsidy removal should be invested in projects that have real benefits for the ordinary Nigerian.

“So, l share the opinion of Christine Largard in this regard, but certainly not on the issue of raising the VAT,’’ he said

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