Nigeria’s influential employers union has warned the Federal Government not to go ahead with a proposal to increase the Value-Added Tax (VAT) charged in the country.
On March 19, the government announced that a new VAT regime might be put in place after the nation’s upper legislative chamber approved a long-awaited new minimum wage of N30, 000.
Speaking at an employers’ forum on Thursday in Ikeja, Mr Timothy Olawale, Director-General of the Nigeria Employers’ Consultative Association (NECA), warned that increasing VAT after approving a new wage would have far-reaching implications for the economy.
Olawale argued that apart from weakening the purchasing power of workers, an increased VAT would impact negatively on manufacturers and businesses, which he said, were currently struggling for capacity utilisation.
“The planned increase will erode the gains of the minimum wage for low-income earners and further weaken their purchasing power, among others.”
He said that increasing VAT should not be the only option open to the government to fund the payment of the new wage.
Olawale argued further that increasing VAT would wipe whatever gains workers would derive from the new wage, expected to be signed into law by President Muhammadu Buhari.
The NECA chief said that increasing VAT would also have implications for manufacturers, businesses and consumers in a nation where manufacturers and businesses had been saddled with infrastructure decay and power challenges.
Olawale lamented that some companies were already closing shops, due to worsening operational challenges while others were struggling to stay afloat.
“The proposed increase in VAT will lead to an increase in the cost of doing business which will likely be passed to the consumers. VAT increase is not desirable at this time.
“Government does not have to increase VAT in order to enable it pay a new wage.
“However, in the event that government must increase VAT against the will of the people, it should be limited to luxury or ostentatious goods only.”
Olawale faulted the comparison by some bureaucrats of Nigeria’s VAT rates with other countries as being irrelevant, pointing out that the business climate in other climes were more conducive than what obtained in Nigeria.
He, however, aligned with the position canvassed by the Chairman of the Federal Inland Revenue Service, Mr Babatunde Fowler, that there should be more individual and corporate entities captured in the tax net paying VAT.
According to Olawale, government should reduce its recurrent expenditure, cost of governance, widen the tax net in its bid to generate more revenue and ensure effective collection of taxes from non-compliant citizens or defaulters.
He told the government not to burden businesses with taxes but that it should create an enabling environment for businesses to thrive and continue to contribute to the growth of the nation.