The Nigeria Employers’ Consultative Association (NECA), has cautioned against the timing of the announced increase of Value Added Tax (VAT) by Federal Government from 5% to 7.2%, following a recent announcement by the Minister of Finance, Budget and National Planning.
Speaking in Abuja, Timothy Olawale, Director-General of NECA stated that “ recently released data of the country’s GDP growth indicated a contraction in the past two quarters Q4, 2018 (2.38%), Q1, 2019 (2.10%), Q2, 2019 (1.94%) and also International Monetary Fund has recently revised downward its global economic growth forecast to 3.2% due to a sluggish growth in the global economy. Therefore, this suggests that at such period of time, economies should be formulating fiscal measures/policies to stimulate their economies”.
He further stated that “the benefits of the recently signed National Minimum Wage of N30,000 would be neutralized by the proposed increase in the VAT, further reduce the purchasing power of the citizens, leading to increase in prices of goods and services, resulting in upward movement of the inflation rate, and further contraction of the economy”.
On businesses, he lamented that since the purchasing power of the citizens would have been reduced, sales of goods and services will reduce and inventories for business will be high and could lead to closure of businesses that ought to be supported by government in reducing unemployment rate that is currently alarming,
He also pointed out that in the event that Government must increase VAT against the will of the people, it should have been limited to luxury or ostentatious goods only. He also urged government to double its efforts at expanding the tax net, reduce the income gap and improve the economy through more friendly fiscal policies and promote the ease of doing business in Nigeria.
In his closing statement, Olawale stated that the“Federal Government should bring up machinery in order to further increase the tax bracket, widen the tax net as the country is presently achieving less than 10% of its VAT potentials”.
Innocent Odoh, Abuja
