Between VAT Increase And A New Telecom Tax

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Recently, the Nigerian Federal Executive Council (FEC) approved FG’s plan to increase the Value Added Tax (VAT) rate from the current 5.0% to 7.2%, effective from January 2020. This is to help the Federal Government (FG) shore up its weak revenue base.

However, as President Buhari prepares to present the 2020 appropriation bill to the National Assembly, there are indications that lawmakers may oppose the proposed VAT
increment, in a bid to shield Nigerians from being inflicted with more hardship.

Alternatively, lawmakers are pushing for a new levy on communication services, as the Communication Service Tax (CST) bill of 9.0% passed its first reading at the Senate, last week.

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In our opinion, the proposed CST is expected to have a similar impact on consumer wallets, to the proposed increment in VAT. More so, communication and internet connection now
rank along with other necessities such as food, clothing, and shelter. More importantly, many individuals; micro and small businesses rely on data and telecommunications services for survival, hence a 9% charge on telecom service may inflict more pain on the very people the lawmakers are trying to protect.

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In all, while we believe the FG needs to ramp up its revenue base by expanding its tax-net,
introducing new taxes will not necessarily amount to more tax revenue as this may further worsen an already faltering economic momentum.

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              “United Capital Plc Research (UCR)”

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