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Nigerian Economy: NECA warns tax hike will deepen hardships for consumers, businesses

*The Nigeria Employers’ Consultative Association also says the Federal Government’s $800million post-subsidy removal palliatives ‘not necessary’, urging the government to rehabilitate the ailing oil refineries before petrol subsidy removal by June 2023

Isola Moses | ConsumerConnect

As a proactive measure to avert disaster for the country’s struggling economy, the Nigeria Employers’ Consultative Association (NECA) has advised that any attempt by the Federal Government to increase taxes will lead to negative impact on households, individuals and businesses.

Mr Adewale-Smatt Oyerinde, Director-General of NECA, who said this in a statement issued Sunday, April 16, 2023, said such a move would only lead to disaster for an economy still struggling to survive.

Oyerinde’s recommendation is said to be the Association’s reaction to a recent recommendation by the International Monetary Fund (IMF) to the Federal Government to increase taxes so as to decrease borrowing.

It is recalled the IMF recently urged the government to reduce its debt by focusing on increasing the tax basket and compliance as a means of generating revenue to cut borrowing.

The Fund in a recent report on Fiscal Monitor titled, “On the path to Policy Normalisation”, noted that Nigeria’s debt was projected to continue to rise.

The global lender also advised the Nigerian Government to remove fuel subsidies and direct them to health and education.

ConsumerConnect reports the Nigerian Government, February 2020, had adjusted the Value-Added Tax (VAT) upward by 50 percent through the Finance Act 2020, and contended that the hike would not have much impact on the poor in particular, as essential consumption was exempted.
However, three years later and with a revised and activated Finance Act, Nigerians know better the implication of the VAT increase, a report recently noted.

Oyerinde said: “For a private sector already overwhelmed by multiple taxes, the imposition of additional taxes on services will make the business community more vulnerable with a trade off on growth and job creation.

The Director-General of NECA also stated: “More taxes, of course, will weaken the purchasing power of individuals and stifle consumption, with attendant consequences for social cohesion.

“It may defeat any attempt to widen the tax net as taxpayers would consider tax avoidance measures.

“There will be massive capital flight, and the drive for direct foreign investment could be defeated.”

Oyerinde, however, advised the government should consider widening its tax net as the association had posited on many occasions and at various forums.

The NECA Chief further disclosed the association is in support of the IMF’s recommendation to the government to consider widening its fiscal net.

It noted the recommendation is the way to go.

Oyerinde further explained: “In addition, one of the problems government at all levels in Nigeria has is the rising cost of governance.

“If the cost of governance can be addressed decisively, it has the tendency to reduce borrowing since recurrent expenditure will automatically decrease.”

The $800m loan to serve as post-subsidy palliatives is not necessary, stated he.

The Director-General rather rather that government must give attention to fixing the refineries and making them operational in the coming months before the removal of petrol subsidy.

He said: “Already, experts and the polity at large have frowned against the loan facility and have proposed definitive approaches including fixing the refineries.

“Also, investigate without delay the subsidy regime with the view to exposing the alleged corruption associated with it; this should not be a difficult thing for the government to do.”

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