Effects of new VAT on Purchasing power

By Maria Famakinwa
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The implementation of Value Added Tax(VAT) by the Federal Government from five per cent to 7.5 per cent has since be generating different reactions from Nigerians who are appealing to the authority concerned to reverse the decision they described as multiple taxation on consumers.

It would be recalled that the Minister of Finance, Mrs Zainab Ahmed, in September last year announced the increment of VAT from five per cent to 7.5 per cent and revealed that the increment became necessary because  the federal government retains 15 per cent of the VAT while 85 per cent of the VAT is for the states and local governments. ”The States need additional revenue to be able to meet the obligation of minimum wage.”

Findings by The Hope in Akure, the Ondo State capital revealed that prices of cosmetics, stationaries, building materials among others have increased slightly as consumers lamented that some traders seized the opportunity of the VAT increment to increase the prices of goods which are not part of the listed items announced by the Federal Government that the VAT will affects.

According to an economist, Mr Jimi Babajide belived that the VAT increment at this time is wrong and uncalled for giving the current situation of the country’s economy. The timing is quite wrong, at this point in time when our economy needs to be revived through government policies that would ginger more consumption. He added that the high interest rate will definitely affect prices of goods and services as he suggested that it is better to do more at VAT collections instead of raising VAT. ”VAT increment will further dampen purchasing power and affect demand for goods and services. Companies also will be affected if people did not demand for goods and services which will in turn affect their profitability and income.” he said.

Sharing similar sentiment, a Youth Corp member, Mr Olayinka Olori, lamented that the new VAT rate has reduced the value of his monthly allowance. ”When the Federal Government commenced the payment of the #30,000 new minimum wage, we were very happy planning to start saving so that we can have enough to start life after our passing out, but the introduction of the new VAT rate has dashed our hope of savings because things are very expensive now due to the 7.5 per cent VAT increment.” he said.

In the submission of a businessman, Mr Layi Edwin, who also described the increment of VAT as a wrong idea hinted that the development is putting pressure on families and businesses as a result of increase in cost of goods and services. ”I think that this is not the right time to increase VAT. The Federal Government should have re-open the border before increasing the VAT.

”I am a businessman, and most of the materials I made use of are imported from Ghana, likewise most of my colleagues in the businesses. Since the border was last last year, things have not been easy. I have mouths to feed and I need to pay my children school fees and attend to other important needs of the family. The border closure couple with the new VAT rate makes living tough for me. I pray the Federal Government will listen to the yawning of the masses and open the border because a lot of citizens are dying in silence.”

In the words of a civil servant, Mrs Peace Adedoyin, opined that the idea of VAT increment was for the Federal Government to indirectly deduct the new  minimum wage given to workers. ”With the new VAT rate and high cost of goods and services, the new minimum wage is the same as the old salaries if not lesser if one calculate all the deductions.

”Everyone is affected one way or the other including those who are not salary earners. It is quite surprise that they also charges VAT on calls made and the rate at which browsing data reduces make one to wonder how ordinary citizens can cope with the new development. Eating three square meal per day is no longer visible for many Nigerians. Prices of frozen foods in the market has increased likewise the prises of some daily needs like toothpaste, detergents, cream and others. The Federal Government should please do the needful to make life better for the citizens.

”The price of local rice still remain high in different markets despite the Federal Government claimed that we are self sufficient in rice production. If truly we are, the price of a bag of local rice should be between #10,000 and #7,000.  It was observed that most traders are bidding under the closed border to exploit the consumers, we are also appealing to the authority concerns to look into the issues of border closure because is affecting many Nigerians. Not only this, if the border is opened, there will be healthy competition among the traders thereby forcing prices of goods and services to come down.” she said.