TUC Rejects Proposed VAT Hike, Warns of Worsened Economic Hardship

The Trade Union Congress of Nigeria (TUC) has strongly opposed the Federal Government’s proposed increase in the Value Added Tax (VAT) rate, as outlined in the Tax Reform Bills currently under review. The union has warned that the planned hike could worsen the already dire economic conditions faced by Nigerians.

Under the government’s proposal, VAT would increase in phases from the current 7.5% to 10%, 12.5%, and ultimately 15%. The TUC has condemned this move, calling it poorly timed and harmful to citizens already struggling with inflation, unemployment, and escalating living costs.

During a press briefing in Abuja on Tuesday, following the union’s National Executive Council meeting on November 26, 2024, TUC President Festus Osifo emphasized the importance of keeping the VAT rate at 7.5%. He argued that any increase would place an unbearable financial strain on households and businesses already battling economic hardships.

“Allowing the VAT rate to remain at 7.5% is crucial to safeguarding the welfare of Nigerians,” Osifo stated. “Increasing it now would only add to the financial burdens that people and businesses are facing in these tough economic times.”

He further pointed out that higher taxes, in the context of rising inflation and unemployment, could stifle economic growth and erode consumer purchasing power, worsening the situation for ordinary Nigerians.

In addition, the TUC called for a review of the tax exemption threshold, urging the government to raise it from N800,000 to N2.5 million annually. This increase, the TUC believes, would provide much-needed relief for low-income earners, increase disposable income, and stimulate economic activity across the country.

“The threshold for tax exemptions should be increased to N2,500,000 per annum,” Osifo proposed. “This adjustment would provide significant relief for low-income earners, helping them cope with the economic challenges they are currently facing.”

The TUC also expressed concerns over the proposed transfer of royalty collection from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to the Nigeria Revenue Service (NRS). The union warned that the shift could result in inefficiencies, inaccurate assessments, and potentially lower revenue collection due to the lack of technical expertise within the NRS.

“Royalty determination and reconciliation require specialized expertise, which the NUPRC possesses, but the NRS lacks,” Osifo explained. “This could lead to inaccurate assessments, enforcement challenges, and ultimately, diminished investor confidence.”

While critical of some aspects of the reform bills, the TUC commended the government’s decision to retain the Tertiary Education Trust Fund and the National Agency for Science and Engineering Infrastructure, recognizing their significant contributions to the country’s education and technological advancement.

“These institutions play a crucial role in improving tertiary education and fostering homegrown technologies. Their continued existence is vital for the sustained progress of our nation,” Osifo noted.

Concluding his remarks, Osifo urged the Federal Government to prioritize the welfare of its citizens in the ongoing discussions on the Tax Reform Bill, ensuring that policies foster equitable economic growth and improve living conditions for all Nigerians.

“As we continue to engage on this issue, we hope the government will adopt tax policies that reflect the interests of the people and promote long-term economic stability,” he said.

The TUC reaffirmed its commitment to advocating for reforms that benefit Nigerians and reflect true leadership focused on the well-being of the public.