The Nigeria Employers’ Consultative Association (NECA) has reacted to the call by President Muhammadu Buhari on state governments to increase Value Added Tax (VAT) in other to raise their internally generated Revevenue (IGR), saying it does not harmonise with the president’s promise to improve the quality of life of Nigerians.
NECA said hiking VAT now that the consumer purchasing power was at its lowest because of the current harsh economic realities in the country, should not be the best solution for the poor state of revenue of the state governments, even as it urged state government to widen the tax net and make reductions on the cost of governance.
The Director-General of the association, Mr. Tim Olawale, who spoke in Geneva, Switzerland, where he attended the International Labour Organisation (ILO) conference, said “the president meant well by urging state governments to increase their internally generated revenue considering the reported over N2 trillion in bail-out funds to many of the states, it was apt for the president to advise them to be innovative in increasing their IGR and at the same time be prudent in their expenditures.
“However, the call for increase in VAT or any other form of tax, as a way to increase IGR at this time is not only misplaced, it will do more harm to the already burdened private sector and further impoverished citizens that the president promised to take out of poverty.”
Besides, Olawale said, “state governments cannot unilaterally increase VAT without the amendment of the Value Added Tax Act at the National Assembly.”
The NECA boss noted that, “the common man will definitely be at the receiving end of any increase in VAT,” adding that, “even if businesses are taxed more, through likely illegal levies and rates outside the provisions of the law, they will naturally pass the cost to the customers whose purchasing power is already at the lowest ebb.”
While proposing a way out for the state governments, NECA Director General noted that what needed to be done by the state governments and ,indeed ,the federal government, was an aggressive taxpayer enlightenment and expansion of the tax net to capture more citizens.
According to NECA, it had been posited, arguably, that less than 40 per cent of Nigerians are tax compliant.
The state governments, he noted, should put mechanisms in place to eliminate leakages, saying a large chunk of the IGR realised does not find their way into government coffer
He also urged state governments to drastically cut the cost of governance, adding that several unnecessary retinue of aides kept by them at prohibitive cost to the state are needless.
“Besides, ingenious idea of corrupt practices in the name of security votes and frivolous foreign travels by state government functionaries are veritable examples of cuttings in avoidable expenses draining state government purses,” NECA advised.