The Nigeria Employers’ Consultative Association (NECA) raised an objection to the planned increase in Value Added Tax (VAT) by the Federal Government, cautioning against the timing.
The Federal Executive Council (FEC) which met for the first on Wednesday, since President Muhammadu Buhari secured a second term in office, hinted of increase in VAT from the current 5 percent to 7.2 percent from 2020.
Minister of finance, budget and national planning, Zainab Ahmed, who briefed journalists after the meeting, said that the government would commence consultations on the increase as well as amend the VAT Act to reflect the percentage increase.
But speaking on the issue on Thursday, Timothy Olawale, the Director-General of NECA, argued that it was wrongly timed given the state of the economy and low purchasing power of the citizens.
According to Olawale, recently release data of the country’s gross domestic product (GDP) growth indicated a contraction in the past two quarters: (Q4, 2018 (2.38 percent), Q1, 2019 (2.10 percent), Q2, 2019 (1.94 percent) while the International Monetary Fund (IMF) also revised downward its global economic growth forecast to 3.2 percent due to sluggish in global economy.
This, he said, suggested that at such period of time, economies should be formulating fiscal measures/policies to stimulate their economies.
Olawale further observed that “the benefits of the recently signed National Minimum Wage of N30,000 would be neutralised by the proposed increase in the VAT and the purchasing power of the citizens further weakened.
He argued that increase in VAT would further lead 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 would reduce and inventories for business gone high with possible closure of businesses that should be supporting government’s quest to reduce the alarming unemployment rate in the country.
Olawale also opined 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.
“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 percent of its VAT potentials,” he stated.
