The Trade Union Congress (TUC) of Nigeria has firmly opposed the proposed increase in Value Added Tax (VAT) from the current rate of 7.5% to 10%, with potential increments to 12.5% and 15% as outlined in the Federal Government’s Tax Reform Bill. The Congress argued that such a move would exacerbate the financial struggles of Nigerians already burdened by inflation, unemployment, and rising living costs.
In a strongly worded statement signed by its President, Comrade (Engr.) Festus Osifo, the TUC emphasized that retaining VAT at 7.5% is essential for mitigating economic hardship and fostering national stability. Issued after its National Executive Council (NEC) meeting on November 26, 2024, at the NAF Conference Centre in Abuja, the statement highlighted key areas of contention in the proposed tax reforms.
The Congress expressed concern over the potential gradual defunding of critical national institutions such as the Tertiary Education Trust Fund (TETFUND) and the National Agency for Science and Engineering Infrastructure (NASENI). These institutions, according to the TUC, are pivotal to Nigeria’s educational and technological development.
Additionally, the TUC criticized the proposed transfer of royalty collection in the oil and gas sector from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to the Nigeria Revenue Service (NRS), warning of significant financial and operational risks.
The Congress welcomed the decision by state governors and Federal Government representatives to retain VAT at its current rate of 7.5%, describing it as a victory for the Nigerian people. “Allowing VAT to remain at 7.5% is in the best interest of the nation. Increasing it would impose additional financial burdens on Nigerians, slow economic growth, and reduce consumer purchasing power,” the statement read.
The TUC underscored the vital contributions of TETFUND and NASENI to national development, emphasizing their roles in improving tertiary education and fostering homegrown technologies. “The continued operation of these institutions is crucial for sustaining progress in education, technology, and economic development,” it stated.
Another positive aspect of the Tax Reform Bill acknowledged by the TUC is the inclusion of a derivation component in VAT distribution among the three tiers of government. This provision, when implemented, is expected to encourage productivity at the sub-national level, reduce overreliance on oil revenues, and stimulate economic growth through diversification.
Despite these gains, the TUC called for significant adjustments to the Tax Reform Bill, particularly regarding the tax exemption threshold. It proposed raising the threshold from the planned ₦800,000 per annum to ₦2.5 million per annum. This change, the Congress argued, would provide much-needed relief to low-income earners by increasing their disposable income and reducing economic pressures on struggling households.
The Congress also raised strong objections to the proposed transfer of royalty collection responsibilities in the oil and gas sector. It argued that royalty determination requires specialized expertise, which is currently possessed by the NUPRC but lacking within the NRS. The TUC warned that the transfer could result in inefficiencies, revenue losses, and reduced investor confidence in the sector.
“The NUPRC has the technical expertise required for accurate royalty determination and effective revenue collection. Transferring this function to the NRS would create overlapping functions, increase compliance costs for industry players, and compromise efficiency,” the statement explained.
While acknowledging the Federal Government’s efforts to address some of its concerns, the TUC urged for additional revisions to ensure the Tax Reform Bill aligns with the interests of Nigerians. It stressed that proactive measures are needed to drive equitable economic growth and alleviate the hardships faced by citizens.
“The Trade Union Congress of Nigeria remains steadfast in its commitment to advocating for policies that improve the lives of Nigerians, especially workers. As discussions on the Tax Reform Bill progress, we urge the government to prioritize sustainable economic growth and better living conditions for all Nigerians,” the statement concluded.
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