Monday, April 011, 2016 8:58AM /FBNQuest Research
Yemi Osinbajo, the vice president who has an informal coordinating role for the economy, told a conference in Lagos on Thursday that “increasing the taxpayer base in the first instance this year” was the administration’s priority.
The context was a discussion of VAT, which brings to mind the statement of Udo Udoma, the budget and national planning minister, in February that the FGN was not considering a rise in the tax’s standard rate of 5% “at the moment”.
The FGN has to come close to its heady targets for non-oil revenue generation if it is to deliver the capital spending and social investment that are its contribution to reviving and diversifying the Nigerian economy.
The details of the 2016 budget that the Senate has approved and forwarded to the presidency are not public. Our chart and commentary are drawn from the FGN’s 2016-2018 Medium-Term Expenditure Framework (MTEF).
For VAT, the MTEF shows a budget of N1.28trn for 2015 and of N1.48trn for 2016, rising to N1.83trn in 2018. The figures are not consistent with the doubling of the standard rate said to be under discussion.
The framework also shows an outturn of just N585bn for January-September 2015. In our view this reflects the fact that growth last year was well below the 5.5% assumed in the budget.
We also suspect that the tax authorities took their collective eye off the ball in the run-up to the election. For VAT, we would support increases in both the taxpayer base and the standard rate. It is an inexpensive tax to collect, and the formula for distribution gives a large share to the beleaguered state governments.