Tax reform bills: VAT increase fundamentally unfair to the poor – Afenifere

The pan-Yoruba socio-political group, Afenifere, has voiced its strong opposition to any increase in Value Added Tax (VAT) or other regressive taxes, adding that such measures are fundamentally unfair, “because the poor will pay a higher percentage of their income.”

Recall that the Nigeria Governors’ Forum (NGF) last Monday threw its weight behind the Tax Reform Bills submitted by President Bola Tinubu to the National Assembly for passage into law.

However, the forum’s members agreed that there should be no increase in the VAT rate or reduction in Corporate Income Tax (CIT) at this time to maintain economic stability.

They also advocated for the continued exemption of essential goods and agricultural produce from VAT to safeguard the welfare of citizens and promote agricultural productivity.

Afenifere spokesperson, Prince Justice Faloye, made this statement in reaction to the bills before the National Assembly and the consensus reached by the Nigerian Governors’ Forum (NGF) to have the documents passed with adjustments made to the percentages allocated to the various elements of the tax reform, after some initial strong opposition from certain members of the forum.

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The Afenifere chieftain, while maintaining the group’s opposition to any VAT increase, argued that its distribution should take into consideration the concept of balanced growth.

He stated that failing to do so would leave a section of the country poorer, lead to higher regional migration with security challenges, and overburden social services.

Faloye further argued that the projected increase in VAT revenue, as outlined in the bills, would come from telecom rates and bank charges.

He warned that pursuing such measures would “further pauperize the poor” and stifle technological growth in sectors such as AI and IT, rather than stimulating them.

According to him, the telecoms and banking sectors already make the highest contributions to Corporate Income Tax, questioning the need to “also drain their customers.”

“On principle, Afenifere can’t support the increase in VAT or any regressive tax, because the poor will pay a higher percentage of their income. It is fundamentally unfair,” Faloye said.

“Specifically, the projected increase in VAT revenue comes from telecoms rates and bank charges, which will further pauperize the poor and stifle technological growth in AI and IT,” he continued.

“These two sectors, telecoms and banking, already make the highest contribution in Corporate Income Tax, so why also drain their customers?”

“The distribution of VAT needs to take into consideration the concept of balanced growth. Otherwise, if it leaves a section poorer, it will inspire higher regional migration with security challenges and overburdened social services,” he added.

Faloye also stated that Afenifere’s cardinal principle has been free education, and as such, it opposes the switch from Tetfund to Netfund, which could stifle university funding.

He emphasided that the government, as part of its social contract, must fund education before it can be morally justified to tax people’s income.

“The foremost Afenifere cardinal principle has been free education, so we don’t support the switch from Tetfund to Netfund, which will stifle the funding of our universities.

“A proper social contract requires the government to fund education before it can be morally justified to tax people’s income.”

“Afenifere advocates political restructuring that will empower states to make judicious use of their resources before restructuring tax sharing,” he added.

“We need better transparency in government expenditures and a reduction of the cost of governance. Otherwise, the increase in tax revenue will be squandered by the political class with no benefits to the masses.

We have seen road contracts awarded without due bidding processes, greater than the expected increase in tax revenue,” he said.

NIGERIAN TRIBUNE