Manufacturers Oppose FG’s Planned Increase in Taxation and VAT

• Ask govt to address infrastructure deficit before AfCFTA take-off

Omololu Ogunmade in Abuja

Manufacturers and providers of goods and services under the aegis of Nigeria Employers’ Consultative Association (NECA) wednesday expressed their opposition to the plans by the federal government to increase taxation, including the value added tax (VAT).
NECA also called on the federal government to address the nation’s infrastructure deficit before the take-off of the African Continental Free Trade Area (AfCFTA).

It lauded the signing of the agreement by President Muhammadu Buhari, saying the trade pact could enhance capital inflows into the country.

It also warned that AfCFTA could harm the country’s economy in view of what it described as the variables of Nigerian businesses and industry.

Speaking after leading a delegation of NECA to a meeting with President Buhari in the State House, Abuja, NECA’s Director-General, Timothy Olawale, said members of the delegation told Buhari that increasing tax this period would increase the burden of companies which were already paying more than they could bear.

Besides, he said increasing VAT now would further impoverish the poor.

A former Minister of Finance, Mrs. Zainab Ahmed, had said in June that the federal government was planning to increase VAT to 7.5 per cent from the current five per cent by 2020.

She said the increment would help the federal government to shore up falling revenue.

But Olawale said the delegation told the president that instead of increasing any tax rate, efforts should rather be geared towards broadening the scope of tax collection by going after 65 per cent of the citizenry who do not pay tax.

He said if at all VAT would be increased, the increase should be targeted at luxury goods and opulent people and not the masses.

“Basically, what we told the president is what we have repeated over and over again in the public domain, that rather than any increase in taxation because as it is, organised businesses are already being overburdened with all sorts of taxes and levies; as a matter of fact, we have calculated 105 different taxes and levies we are paying as we speak, which is cumbersome and burdensome.

“So, we had advised that rather than resort to any form of increase in taxation, what government should be looking at is putting mechanism in place to widen the tax net in such a way that almost 65 per cent of non-compliant taxpayers are captured in the tax net. That way, more revenue will accrue into the coffers of the government. We specifically also voiced our concern with the suggestion and proposal out there that value added tax should be increased.

“We have advised government that if it comes to be, it will reduce the purchasing power of Nigerian workers as well as the poor masses that the president, as we know, is working hard to improve their lot. We are saying that if government must as a matter of an avoidable necessity increase VAT, it should target luxury goods as well as the extra affluence in the society, not the poor masses or consumption goods and services that are for the benefit of the masses,” he said.

On AfCFTA, Olawale said whereas the agreement was laudable and could enhance capital inflows into the country, it could also harm the country’s economy in view of what he described as the variables of Nigerian businesses and industry.

He listed such variables to include poor infrastructure deficit, which does not make Nigerian goods and services competitive.

According to him, to save the country’s businesses from chaos, the government must address the lingering challenges, otherwise, companies that are already struggling will eventually fold up when the implementation begins.

“We don’t want a situation where our businesses are not competitive due to the disadvantaged environment in which they operate. Of course, we are all familiar with the disadvantaged environment with regards to the issue of agriculture among which is power and the issue of road network, that is transportation of goods and services and accessibility to the different business environment.

“What we are saying is that if all these issues are not addressed properly, to make our businesses competitive, definitely we are going to be at the receiving end, to the extent that our nation will become a dumping ground. And even some of the factories that are even struggling presently may end up folding up. Of course, we know the history of the textile sector and that can be replicated in any sector and we don’t want us to get to that extent.
“That is why we are saying government should put mechanism in place to address these issues so that we can be competitive and so that we can take our rightful place and maximise the benefits of the Africa Continental Free Trade Area (AfCFTA) agreement,” Olawale added.

On the level of compliance of NECA with the new Minimum Wage Act, which jacked up minimum wage in the country from N18,000 to N30,000, Olawale said already 70 per cent of members of NECA were paying above N30,000 before the law was made and there was nothing to worry about on compliance with the law.

Responding, Buhari told the NECA delegation that federal government’s policies would be designed to support exportation more than importation, assuring them that the implementation of AfCFTA would be devoid of crisis.

Buhari also told the group that he agreed with members of the delegation that there are challenges that need to be fixed, pledging that such challenges will be addressed with a view to putting in place the mechanism for the success of Nigeria’s businesses.

He urged the delegation to be patient and show understanding and simultaneously engage the federal government by giving it what he described as “constructive and honest feedback.”