The Nigeria Employers’ Consultative Association (NECA) has faulted the timing of the announced increment of Value Added Tax (VAT) by Federal Government from five per cent to 7.2 per cent.
Mr Timothy Olawale, NECA’s Director General, made this known in Lagos on Thursday.
Olawale said that the benefits of the recently signed National Minimum Wage of N30,000 would be neutralised by the proposed increase in the VAT.
The Federal Executive Council on Sept. 11 approved 7.2 per cent as new VAT rate for the country, up from the current five per cent.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, who spoke with State House Correspondents after the FEC meeting in Abuja, said consultations were in process over when the new rate would apply.
Olawale said the increment would further reduce the purchasing power of the citizens, lead to increase in prices of goods and services, increase inflation rate, and further contraction of the economy.
According to him, recently released data of the country’s GDP growth indicated a contraction in Q4, 2018 (2.38 per cent), Q1, 2019 (2.10 per cent) and Q2, 2019 (1.94 per cent).
“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, ” Olawale said in a statement.
Olawale said that, since the purchasing power of the citizens would have been reduced, sales of goods and services would reduce and inventories for business would be high.
He said: “This can lead to closure of businesses that ought to be supported by government in reducing unemployment rate that is currently alarming. ”
The DG urged the 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 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 per cent of its VAT potentials, ” Olawale said.