By Bimbola Oyesola, [email protected]
The Nigeria Employers’ Consultative Association (NECA), at the weekend, warned that the call by the International Monetary Fund (IMF) to the federal government to increase taxes in order to reduce borrowing would spell nothing but disaster for an economy struggling to stay afloat.
Director-general of NECA, Adewale Oyerinde, noted that such an economic decision may appear to be in favour of the government, since it would drive up its revenues, but cautioned that “any attempt to hike taxes would have a negative impact on households, individuals and businesses. This cannot be overstated.”
He stated that, 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.
“In an environment where individuals and corporate entities provide services and infrastructure that should normally be provided by government, the best the government can do is to support and ease their burdens, rather than considering any plans towards making them pay for its inefficiencies and fiscal indiscipline,” he said.
He expressed that it is not every recommendation from development agencies that should be implemented without considering the peculiarity of the context in which such policies will be implemented.
He said, “Many a time the emphasis is always on revenue mobilisation when the conversation about tax increases is being canvassed, but It is instructive to note that tax economics encompasses more than just public funds.
“For any discerning government, a higher tax in an environment with rising inflation is not the best decision.”
According to Oyerinde, more taxes will weaken the purchasing power of individuals and stifle consumption, with attendant consequences for social cohesion.
He explained that countries tend to reduce taxes during economic lull but increase the same during a boom. “Unfortunately, we are not in the latter position,”, warning that any attempt to consider tax hike would create more burdens on tax payers.
The NECA Director General said it may defeat any attempt to widen the tax net as tax payers would consider tax avoidance measures, adding that there will be massive capital flight, and the drive for direct foreign investment could be defeated.
He advised that government should consider widening its tax net as NECA had posited on my many occasions and at various forums.
He however said Organised Private Sector supported the IMF’s recommendation to the federal government to consider widening its fiscal net, noting that 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 would automatically decrease,” he said.
Oyerinde reiterated that the $800m loan to serve as palliatives in view of the planned removal of subsidy is not necessary.
Rather he said government must give attention to fixing the refineries and make them operational in the coming months before the removal of petrol subsidy.
He added, “Already, experts and the polity at large have frowned against the loan facility and have proposed definitive approaches including fixing the refineries and 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.”