The federal government has declared that it is not planning to increase Value Added Tax (VAT) again.
According to the Minister of Finance, Zainab Ahmed, during an address to Senate Committee on Finance, Thursday, the federal government had, in 2019, presented a bill proposing an increase in VAT from 5 to 7.5 per cent.
The bill was passed by the National Assembly in November of the same year. It was signed into law by President Muhammadu Buhari in January after which implementation started.
The decision to increase VAT was met by condemnation from individuals, civic groups and even lawmakers who felt it was ill-timed considering the hardship and dwindling economy.
Chairman of the panel, Adeola Olamilekan, had asked the minister of the current state of the 2020 finance bill. She was also asked to address speculations as to whether there are plans to increase VAT again.
“This current budget was predicated on $40 per barrel but as we speak the current price of the crude oil in the market is $37, what are the contingency plans as far as you are concerned going forward. Also, there is misrepresentation of information that there will be every likelihood we increase the VAT again by 2.5 per cent. Is that a statement of fact or a statement of misrepresentation?” he asked.
In her response, Ms Ahmed explained that the actual projection was $40 per barrel and that is the average price that will be projected for the year.
“Some of the institutions that are responsible for tracking the price of crude oil, actually have crude oil prices going as far as $50, $52 per barrel. We took the safer path. It seems the second wave of COVID-19 in Europe is affecting us and we are hoping to have clarity as to which direction to take in the next week or two.
“As for the finance bill, we have the draft. There will be no increase in VAT or any form of taxes because we see 2021 as a year of recovery – not only for government but businesses as well.”
Queries
Meanwhile, the minister was also queried for the underfunding of key agencies and parastatals under her ministry including the Office of the Accountant General of the Federation.
The Accountant General, Ahmed Idris, who also appeared before the panel for his budget defence, had decried gross underfunding of his office.
For the 2021 budget, he proposed N3.9 billion as personnel cost, N483 million for capital expenditure and N752 million for overhead cost.
He also complained that all the 37 agency’s offices are all in dire need of rehabilitation.
“In particular, the Mosaic House in Lagos where the office of the accountant general was cited before; that office is a huge property that can be utilised to generate revenue. It is being occupied by unwanted elements. If it is rehabilitated, it will go a long way in boosting revenue because it is in the heart of the commercial city.
“We are grossly underfunded. We are being treated like any other MDA. We know the constraints but we can be better in terms of our ability to meet expectations and needs of Nigerian economy,” he said.
Some members of the panel agreed with the accountant-general.
Mr Olamilekan said he wondered how the office of the accountant general of the federation will be underfunded.
Ayo Akinyelure, a member of the panel, said if the office of the accountant general of the federation that accounts for the revenue generation of this entire country, is grossly underfunded, there will be leakages.
“If we want prudency and accountability for the finances of the government, this office must be properly funded. If well-funded, they will not be able to engage in leakage collaboration with agencies of government charged with revenue generation.
“The revenue of this country has been diverted. Most of the agencies of government, parastatals, DGs, secretaries, don’t account for actual revenue of the government. And this is the office that put them to check. Provision has to be made for the office in Lagos for the proper infrastructure to be put in place.
A member, Opeyemi Bamidele, blamed the poor funding on the “tyranny of the envelope system by the ministry of finance” – the act of cutting down the budgets of MDAs.
“The idea of people sitting in the budget office and just sharing envelopes among MDAs without peculiar reference to prevailing circumstances is something that should become a thing of the past,” he said.
Meanwhile, the minister was asked to explain the reason behind the poor funding as well as the envelope system.
What was passed in MTEF is what is distributed in every MDAs, she explained.
“OAGF performs a critical role, so you find that we have provisions in the service wide votes, for IPPIS… The budget is for the AGF to use to maintain the facilities of his own office, not this national infrastructure. So when we give him that, he decides what he will do.
“We know that it is not sufficient, no agency gets enough,” she said.
The panel asked the accountant-general to come up with a memo that will be presented to the executive on why the proposed budget for his office is insufficient and state their peculiar needs.
Mr Olamilekan also noted that “continuous conversations will be held to ensure a permanent solution is found.”
