Raising tax under the present economic situation may further hurt economic growth and erode purchasing power, analysts at CSL Stockbrokers Limited have warned.
They stated this in a report obtained monday.
The Revenue Mobilisation Allocation and Fiscal Commission (RMFAC) Chairman Shettima Gana recently called for Value Added Tax (VAT) to be increased from five per cent to about 7.5 per cent to shore up Nigeria’s revenue base.
According to the CSL report, while Gana’s call seemed reasonable given the declining oil revenues, made worse by production constraints in the oil-rich Niger Delta, “we are of the view that tax rate hikes at present, would not only be premature, but will have more negative economic implications than positive.”
The Lagos-based firm argued that there was still opportunity to grow non-oil revenues in the country. This, they noted could be achieved by further widening the tax net and improving efficiencies.
“The Federal Inland Revenue Services (FIRS) Chairman Babatunde Fowler has, on a number of occasions, stated that a large number of corporations and individuals are still uncaptured and untaxed. Furthermore, numerous cases of tax evasion have been cited regularly by FIRS,” the report added.
Nigeria’s Consumer Price Index (CPI), which measures inflation, rose by 0.9 per cent to an 11-year high of 16.5 per cent in June compared to 15.6 per cent in May, the National Bureau of Statistics (NBS) revealed last week. That was the fifth consecutive month that the headline index rose. The increase in the month under review was attributed to energy prices, imported items and related products, which continued to be persistent drivers of the core sub-index.