Bimbola Oyesola, [email protected]
The Nigeria Employers’ Consultative Association (NECA), has warned that the last week’s announcement of increase in
Value Added Tax (VAT) from 5% to 7.2% by the Federal Government was done at a wrong time.
Calling for a rethink on the recent announcement by the Minister of Finance, Budget and National Planning, Mr. Timothy Olawale, Director-General of NECA stated that the increase would be detrimental to the economy.
He said, “The 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 sluggish in global economy. Therefore, this suggests, that at such period of time, economies should be formulating fiscal measures/policies to stimulate their economies”.
He added that the benefits of the recently signed National Minimum Wage of N30,000 would be neutralized by the proposed increase in the VAT.
Olawale said it would 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 the impact on businesses, he said, “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,
Mr. 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.
“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,” he advised.