Moves by the Federal Government to increase Value Added Tax (VAT) from five per cent to 7.2 per cent would neutralise the benefits of the recently signed national minimum wage of N30,000, the Organised Private Sector (OPS) has said.
Nigeria Employers’ Consultative Association (NECA), an arm of the OPS argued that the proposed increase will further reduce the purchasing power of the citizens, leading to increase in prices of goods and services as well as resulting in upward movement of the inflation rate, and further contraction of the economy.
Director-General of NECA, Timothy Olawale, who lamented its negative impact on businesses, stressed that since the purchasing power of the citizens would have been reduced, it will also affect sales of goods and services, which could lead to closure of businesses that ought to be supported by government in reducing the alarming unemployment rate.
He said increasing VAT at this point in time was not necessary as economies should be formulating fiscal measures and policies to stimulate their economies due to sluggishness in global economy.
This, he stressed, followed recent report by the International Monetary Fund (IMF), which revised downward its global economic growth forecast to 3.2 per cent due to slow growth of the global economy.
Rather than increasing VAT to fund national minimum wage as claimed by government, Olawale, stated that Federal Government should bring up machinery to further increase the tax bracket and also widen the tax net as the country is presently achieving less than ten per cent of its VAT potential.
The NECA boss opined that in the event that government must increase VAT against the will of the people, he urged 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 decision of the Federal Government to increase VAT was disclosed at the Federal Executive Council (FEC) by the Minister of Finance, Budget and National Planning, Zainab Ahmed to enable government to properly fund the new national minimum wage.