We Need N2.8 Trillion to Finance NEEDS -FG
VAT fetches N440bn in 10 years
From Uche Obike and Kunle Aderinokun in Abuja
The Federal Government will need as much as N2.8 trillion (an equivalent of $20 billion) to finance the National Economic Empo-werment and Development Strategy (NEEDS).
President Olusegun Oba-sanjo, represented by the Minister of Finance, Dr. (Mrs.) Ngozi Okonjo-Iweala, said yesterday in Abuja at the Nigerian Stock Exchange's (NSE) Bi-ennial Conference of Chief Executive Officers (CEOs) and Directors of Quoted Companies that the $20 billion is required for the financing of NEEDS between 2003 and 2007.
Also, Okonjo-Iweala at another occasion in Abuja said N440 billion has been generated from the Value Added Tax (VAT) in the last 10 years of its operation.
On the amount needed for the NEEDS programme, Obasanjo said: "There can be no serious private sector investment without large infusion of capital from the capital market. It is anticipated that the estimated 4.5 to 5 billion dollars per annum needed to fund the economic reform programme will come from sources such as domestic and foreign direct investment (FDI) and government financing."
"Against this background, it is easy to see why the NEEDS document gives prominence to the critical place of the capital market in the development of a stronger economy," he added.
The president expressed optimism that the nation's market will be a major source of funding for the economic reform programme, and assured that the securitised public domestic debts will be restructured to longer terms and listed on the stock market.
This, according to him, is because moving the bonds from the money market to the capital market would help to further deepen the market.
The government, he said, also plans to restructure its existing bonds of N1.3 trillion in securitised public domestic debts, out of which over 60 per cent is in 91 -day treasury bills.
Obasanjo announced that a major priority of his administration is to deepen the capital market.
"This explains the return of the federal government, after 17 years of absence, to the capital market," he said.
Obasanjo recalled that the federal government issued N150 billion bonds with maturities ranging from three, five, seven, and ten years.
He added that, "these bonds, which have already been listed on the stock exchange, have helped to raise capitalization of the stock exchange and enriched the variety of securities available in the market."
The president added that government's return to the market was not just for the purpose of financing the deficit, but also to stimulate all round development of the market.
Also, the President expressed the view that the ambitious goals of the medium term economic plan were anchored on the robust participation of the private sector.
He, however, added that the private sector cannot lead the growth without a vibrant and active capital market to promote the requisite long-term funds for investment.
To make these funds available, Obasanjo noted that all possible legitimate avenues, including government participation, should be explored.
Obasanjo challenged the various institutions, players, and actors in the system, including the NSE, to think seriously and come up with strategies to enhance capacity and develop new strengths which are needed to achieve the objectives encapsulated in the NEEDS document.
He commended the current leadership of the NSE which has contributed significantly to raising the volume, profitability, and depth of the stock market.
Earlier, the President of the NSE, Dr. Raymond C. Obieri explained that the theme of the conference "A Forum for Positive Change" is very relevant and timely, considering the bold initiative taken by the present administration as represented by NEEDS.
Obieri said the central object of NEEDS is to facilitate the development of a private sector led economy.
"This confers enormous responsibility on the stock market stakeholders and I have no doubt whatsoever in our ability to achieve set targets," Obieri said.
He assured that the NSE will collaborate with the government to build a virile economy and lay the basis for a solid future.
Okonjo-Iweala at the inauguation of the VAT tribunal expressed disappointment over the N440 billion generated in 10 years from the tax because it fell short of government's expectations. "It is not satisfactory enough especially when one realizes that VAT is a system in which high yielding potentials abound," she said.
The minister also said, "an average of about 15 per cent recorded as an annual VAT revenue generation increase in the last three years is not good enough."
She explained that "the relatively low annual average increase and less impressive annual average collection of N40 billion are indices that suggest that a lot still have to be done to actualize the full potential of tax."
"All we need to do is brace up with all the zeal and wits to be able to meet the challenges ahead," she added.
The Finance Minister pointed out that everybody need to always be conscious of the mechanism that makes the tax dependent on trust and honesty of the parties to a transaction. She explained that "this very singular uniqueness of the tax makes it highly susceptible to all manners of abuses particularly where strict control system is lacking."
"For instance", she stated, "the tax may not be charged, where it is charged, it may not be fully remitted or not remitted at all."
She added that, "there are also several offences relating to VAT registration." According to her, "as many as 14 different offences, both criminal and civil, are identified by the VAT Decree (now Act) No 102 of 1993. None of them should be allowed to be committed with impunity."
While noting that the VAT Act, which prescribed conviction as a condition for imposing certain penalties for some of the offences, expects criminal investigation and prosecution of erring payers. She said this has been implemented, not only in VAT but generally in the country's tax administration.
"The enabling laws are there, the machinery for enforcement like the police or the Economic and Financial Crimes Commission (EFCC) is there. Also, available for this purpose are the regular courts if the VAT Tribunals are for now not competent to handle criminal matters," she stated.
She therefore urged that, "whatever are the hurdles in the way of criminal prosecution for VAT crimes, lie, evasion, false claims of input tax invoice etc. should be addressed in earnest and removed."
Okonjo- Iweala warned that VAT is not constituted as a tool to be used at will by the Federal Board of Inland Revenue against payers. "In fact, this will be against the spirit of the enabling law. A VAT Tribunal is a quasi-court of justice to which either aggrieved party (the Board or the VAT payer) can go to seek redress," she said.
While recalling that the Federal Government had embarked on wide VAT campaign in the first three years of the commencement of the tax administration, she expressed optimism that "this will further go a long way in sensitizing the VAT payers and other stakeholders about their rights and obligations under the VAT legislation and the related instructions in order to minimize incidence of breaches and incidental VAT revenue losses."
VAT Tribunals are now constituted in three zones (Enugu, Kaduna and Ibadan), each with a chairman and members. Mr. Paul A. Belabo chairs the Enugu zone with Sir Ike Nwokolo, Chief Amadi Awa, Mr. Ephraim Ndubusi and Mr. Ono David Ideh as members.
The Kaduna zone comprised of Mr. Abraham Ndana Yisa as chairman, with Alhaji Argungu, Alhaji Musa Mohammed, Alhaji Suleiman Audu and Mrs. Asiya Kabiru Yusuf as members. The Ibadan zone is headed by Justice S.A. Ajayi and other members are Alhaji S.A. Barau, Kayode Sofola (SAN), Chief J.O. Olopade and Prof. J.S. Odama as members.
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