UPDATE 2-Nigeria plans VAT increase in push to raise non-oil revenue

(Adds comment by chairman of Senate committee on finance,
paragraph 8, other details)
By Felix Onuah
ABUJA, Sept 12 (Reuters) - Nigeria plans to increase
value-added tax on goods, the finance minister said, as Africa's
biggest oil exporter seeks to reduce its reliance on crude
sales.
President Muhammadu Buhari's government has repeatedly said
it wants to boost non-oil revenue since oil sales make up 90% of
foreign-exchange receipts. Raising more money from taxes has
proved difficult in a country where so many small businesses are
not registered.
Finance Minister Zainab Ahmed, addressing journalists late
on Wednesday after a Cabinet meeting in which the proposal was
approved, said the government proposed raising VAT next year to
7.2% - up from 5%. The current level is one of the lowest in the
world.
"This is important because the federal government only
retains 15% of the VAT - 85% is actually for the states and
local government," she said. "The states need additional revenue
to be able to meet the obligations of the minimum wage."
Nigeria's minimum wage was increased in April to 30,000
naira ($98) a month from 18,000. Prior to the minimum wage rise, the government had argued
that many of Nigeria's 36 states struggled to pay salaries of
state employees.
The planned VAT rise must be approved by parliament before
it can become law.
The committee on finance in parliament's upper house, the
Senate, will invite Ahmed and the chairman of the Federal Inland
Revenue Service to explain the reasons behind the plan, its
chairman said late on Thursday.
Earlier, the main opposition People's Democratic Party (PDP)
criticised the proposal.
"An increase in VAT will worsen our decrepit economy and put
more pressure on families and business as it will result in (an)
increase in costs of goods and services," said the PDP in a
statement.
The West African country fell into a recession in 2016 as a
result of low oil prices. Despite emerging from the recession
two years ago, economic growth remains low - at 1.94% in the
second quarter. Inflation has remained in double figures for the last three
years, above the central bank's single-digit target, which has
pushed up the cost of living in a country where most people live
on less than $2 a day.
The proposed VAT hike is part of a broader drive to increase
tax revenue.
Last week Nigeria's tax chief told Reuters 5.32 trillion
naira ($17.39 billion) was collected in taxes in 2018 and his
office was targeting 8.9 trillion naira this year. ($1 = 362.48 Nigerian naira)