The Nigeria Employers’ Consultative Association (NECA), has advised the Federal Government to consider the negative consequences and economic impact an increase in tax will have on households, individuals and businesses before taking that decision.
The NECA’s Director-General, DG, Mr Adewale-Smatt Oyerinde, in a statement on Sunday, explained that such a move would only lead to disaster for an economy struggling to stay afloat.
Oyerinde was reacting to a recent recommendation by the International Monetary Fund (IMF) to the government to increase taxes in order to reduce borrowing.
The IMF had recently called on 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 its latest Fiscal Monitor titled, “On the path to Policy Normalisation”, released recently noted that Nigeria’s debt was projected to continue to rise and urged the government to remove fuel subsidies and direct them to health and education.
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.
“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.”
The director-general said, however, that government should consider widening its tax net as the association had posited on many occasions and at various forums.
He said also that the association was in support of the IMF’s recommendation to the government to consider widening its fiscal net, saying, it is the way to go.
“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, “ he said.
Oyerinde said that the $800m loan to serve as palliatives in view of the planned removal of subsidy was not necessary.
He urged, rather, that government must give attention to fixing the refineries and making them operational in the coming months before the removal of the petrol subsidy.
“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.