“This shows that the government is only interested in high volume cash to play with.”
With effect from yesterday, costs of “VATable” goods and services increased by 2.5 per cent. An unpleasant marginal “add-on” that may not in itself cause an atrocious upset as it ordinarily appears, but as typical of any economic analysis, the devil is hidden in its multiplier effects.
VAT, when it is discriminatory as common in different regions that have embraced the form of tax is not a mere revenue-generating medium but a fiscal policy used to address income inequality and achieve specific economic objectives. Hence, food items and other essential commodities are exempted in many climes. Countries have also used VAT to incentivise the consumption of professional services. VAT on professional service in Egypt, for one, is lower than the standard rate.
VAT, like every consumption tax and income tax, affects individuals’ purchasing power , ability to save and invest. These three variables affect and are affected by the productive capacity of the economy. Also, the argument by the Senate President, Ahmed Lawan, that the purchasing power of an average Nigerian would not be affected as the increment in VAT was targeted at luxury items seems to have betrayed the government’s lack of understanding of how the economy works.
According to him, corruption is the biggest tax burden on an average Nigerian. When a country is extremely corrupt as Nigeria currently is, he said the malfeasance is a “tax on the citizens, and it is so costly that it has reduced millions of Nigerians to abject poverty and perpetual misery.” Each day, hundreds ‘rebate’ the looting of public resources via deaths, illness, epidemics, gridlock, waste of man-hours, unemployment, loss of investment, fire incidents and dozens of other made-made misfortunes that are not supposed to be challenges if the government were responsive, responsible and committed to the social contract it entered into with the people.
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