Following the dwindling tax revenue in the country (the tax administration agency – Federal Inland Revenue Service – has missed its revenue target in the last three years from 2015 to 2018), the Federal Government introduced various taxes in 2019 and one of them was the reinstatement of five percent Value Added Tax (VAT) on all equities transactions.
Additionally, the government announced an increase in the VAT rate by 50 percent to 7.5 percent. The project, therefore, explored the impact of the VAT increase on equities investors and the entire equities market, which has been struggling with low investors’ appetite.
The report created excitement among the domestic retail investors and was seen as a call to action by the investors, who believed at that time that the federal government may rescind its decision to jerk up VAT on equities transaction by another 50 percent or even, possibly, revert to statusquo by effecting total removal of VAT on equities.
Unfortunately, typical of the federal government of Nigeria, the decision has been taken and so, the government was bent on increasing VAT due to its dwindling revenue and the need to also fund the 2020 budget, and so, it would not go back on its decision as it just signed the Finance Bill into law. The government had budgeted N10.59 trillion for 2020 out of which, N292.6 billion or 2.8 percent of the total revenue is expected to come from tax revenue while 4.4 percent (N463.95 billion) of the total budget is expected to come from stamp duty collections.
I basically used Microsoft excel to record the data I used. I also use it in plotting the charts.
What was the hardest part of this project?
The process of calculating the Value Added Tax reinstatement and additional 2.5 percent increase for both the buy and sell side transaction was quite demanding as I took special care to ensure that all calculations were thoroughly done to avoid error. The calculations were done on the commissions charged by the brokerage firms as well as the apex regulatory body in the market – the Securities and Exchange Commission and the Nigerian Stock Exchange. Infact, for all the commissions chargeable before the reinstatement of VAT, I calculated and reflected the changes before going ahead to calculate what that increment would cost investors in monetary terms. This was done after I also calculated the average daily transaction value.
What can others learn from this project?
A lot of information are hidden in data and public interest stories that could make a difference in policy formulation could be written just by thinking through and interrogating some numbers/figures and what their implications are. This is where developmental journalism and agenda setting come in as they are necessary to sway government policies for public interest. Agenda setting is one thing I set out to do with this report.
Therefore, as far as this project is concerned, journalists should understand that no matter how difficult a government in power is, we can still do stories that address the needs and interest of the public.