Muhammad Sallau, a Senior Lecturer of the Federal University Dutse, Jigawa on Friday urged the Federal Government to expand the scope of the Value Added Tax (VAT) to capture more items instead of an outright increment.
Salawo gave the advice in an interview with newsmen in Abuja.
The Federal Executive Council on Wednesday approved the increment of tax from five per cent to 7.2 per cent.
Sallau, who is also a financial expert, advised that instead of raising VAT to source for revenue to pay minimum wage, the government should rather put in more effort to recover more taxes from business owners or companies who evaded tax.
“My opinion is that an increase of VAT will inevitably impact on consumption and VAT compliance. I believe combined effect will reduce the expected revenue.
“Therefore, government should also consider the following intended consequences; there will be decline in spending which could have a recessionary effect.
“There could be a higher inflation and decrease in real disposable income which might slow down Gross Domestic Product (GDP) growth” he said.
Salawo added that the VAT increment could result to interest rate hike and rise in inequality because of the regressive effects on low income families.
According to him, the consequence of inequality means that poor people will become poorer.
Finance, Budget and National Planning, Mrs Zainab Ahmed told newsmen said that the increase will only begin after the VAT Act is amended by the National Assembly and after consultations with the state and local government areas as well as the Nigerian populace.
According to her, “Our projection is to finish consultations early enough so that it takes effect in 2020.”
She further disclosed that the FEC approved the Medium Term Expenditure Framework and Fiscal Strategic Paper, MTEF/FSP for 2020 to 2022, which will guide the 2020 Budget.
The Minister said the next step was to present the document to the National Assembly for consideration.