The Senate has appealed to the Federal government to consider increasing taxes on luxury goods and services to shore up its dwindling revenue available to finance government spendings in the country.
In recent times there has been an increased effort by the government to raise revenues in the face of fluctuating oil prices after the country recovered from an economic recession that slashed public finances, weakened its currency and cut spending on capital projects.
Nigeria currently has one of the lowest tax rates on the African continent, and relies on crude oil sales for much of government revenues.
In the past, the government had mulled the idea of raising taxes on luxury goods to 15 percent from the current rate of five percent, to boost its tax to GDP ratio to 15 percent from six percent which is significantly lower than Ghana and Egypt at 16 percent, Morocco at 22 percent and South Africa at 27 percent.
The last economic contraction in the country has seen a reduction in the acquisition of luxury goods by Nigerians. The shrinking consumer wallet and unfriendly economic policies of the government have seen a depletion in the number of high end consumers, wiping out the middle class and an alarming number of lower class in the country.
Femi Adeyemo, a financial analyst believes the plant to increase the tax on luxury goods by the government can be likened to chasing the air. Instead, the government should focus more on revitalizing the economy and bringing more people into the middle and high-end consumer segment.
“The first question we need to ask is how many Nigerians buy luxury goods” he queried.
According to Adeyemo, Nigerians are getting poorer and can no longer afford the luxury items again.
“This is not the right time to introduce such a tax increase on luxury goods, “he said.
OLUFIKAYO OWOEYE
