VAT Increment Is Anti-Poor – Tax the Rich!

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The APC government has increased the Value Added Tax by 44% in the second week of September. Instead of 5%, consumers will now pay 7.2% as Value Added Tax. According to Zainab Ahmed, the Minister of Finance, Budget and National Planning, this increment is to enable the state governments (who receive the lion share from VAT) pay the new minimum wage.

This excuse is not tenable and working-class people must reject this anti-poor expansion of what is a regressive form of taxation. The outgoing government of Chief Oluegun Obasanjo tried to do the same thing in 2007. On the instructions of the IMF and World Bank, he increased VAT by 100% from 5% to 10% (and also increased fuel pump price). The trade unions and radical civil society organised a massive general strike and street protests. The increments were immediately reversed.

We are not against taxation. But it is the rich and corporations that should be taxed more, and not poor working-class people. Value Added Tax (VAT), which is also known in some countries as goods and services tax (GST) is a regressive tax. That is to say that since it is a flat tax, everybody irrespective of your income pay the same amount of tax, on those items covered by the VAT.

What this means in essence is that poor people bear a higher tax burden with VAT. The amount paid for goods and services thus taxed means much more to them than what it means to the rich, for whom it could be nothing but “chicken change”. So, what the government is essentially doing is trying to take back the paltry minimum wage it is being forced to give with the left hand, with the right hand of VAT.

The argument of government officials that medical and pharmaceutical raw materials and products, basic food items, baby products, commercial vehicles and spare parts and fertiliser, are not affected by VAT is similar to one of the arguments they push forward when increasing fuel pump price, saying, it is the rich who can afford cars that will be affected. This contrived excuse purposely fails to look at the multiplier effects of certain items.

For example, building materials will be affected by VAT. This will definitely result in hikes in rents. Textile materials are affected by VAT, will workers not wear clothes?

We stand for a steeped progressive tax regime. But that is exactly what the Nigerian government is not doing. Rather, over the years, corporate income tax which was 35% during the First Republic for example has been decreased to 30%.

And not only are the bosses paying less, most of them pay next to nothing. Tax avoidance is a major tactic that they use to ensure maximum profits at the detriment of the poor masses. For example, MTN is the second largest company on the Nigerian stock exchange. But its biggest shareholder is MTN Mauritius which has a 76.08% stake, worth a whooping N1.68 trillion!

Meanwhile, it is generally known that Mauritius is a tax haven. These are countries where companies are charged exceedingly low taxes and allowed to set up shell companies. These dubious companies like MTN Mauritius are then used to avoid paying the due tax in countries where they make money, like Nigeria in this case.

One of the ways this is done is by “double taxation treaties” being signed by tax havens with other countries like Nigeria. While it is on the face of it meant to save the corporations from paying double tax, it actually amounts to their avoidance of paying any significant amount in tax. Through such means as this, over $50bn is lost by African countries to illicit financial flows. This does not include the loss of billions of dollars due to tax breaks given to foreign investors, like those in the Export Processing Zones across the country.

The wealth of the five richest Nigerians can eradicate poverty in the country. The logical thing would be o tax the rich, if indeed there is inadequate money to fund the miserly amount of N30,000 as national minimum wage. But it is what these rich people declare that gets taxed, and poorly so too. Meanwhile, workers in the public sector and organised private sector have their taxes deducted at source.

Over N220bn has been lost in recent times to tax avoidance by rich people. It is them that should be on the firing line of collecting these and increasing the tax they pay, and further ensuring they keep paying such.

Organised labour has rejected this increase in VAT as soon as it came out, in a press statement signed by Emmanuel Ugboaja, the NLC General Secretary. This rejection must be followed up with mass mobilisation until the VAT is reversed and the income tax regime made more progressive.

We boldly say: No To VAT! Tax the Rich!!

by Baba AYE

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