The Nigeria Employers’ Consultative Association (NECA) has warned that any move by the government to increase taxes would harm households, individuals, and businesses.
Adewale-Smatt Oyerinde, NECA’s director-general, made this statement in response to a recent call by the International Monetary Fund (IMF) for the Nigerian government to reduce its debt by increasing the tax basket and compliance.
In its latest fiscal monitor report, the IMF suggested that Nigeria’s debt would continue to rise and recommended that the government remove fuel subsidies and direct the savings to health and education.
However, Oyerinde believes that increasing taxes to reduce borrowing would be disastrous for an economy struggling to stay afloat.
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“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,” Oyerinde said.
“More taxes, of course, will weaken the purchasing power of individuals and stifle consumption, with attendant consequences for social cohesion.
“It may defeat any attempt to widen the tax net as taxpayers would consider tax avoidance measures.
“There will be massive capital flight, and the drive for direct foreign investment could be defeated.”
Oyerinde further said the government should consider widening its tax net as the association had posited on many occasions and at various fora.
He also said the association supported the IMF’s recommendation to the government to consider widening its fiscal net, as it is the way to go.
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“In addition, one of the problems governments at all levels in Nigeria have is the rising cost of governance,” he added.
“If the cost of governance can be addressed decisively, it tends to reduce borrowing since recurrent expenditure will automatically decrease.
Regarding the World Bank’s $800 million fund for subsidy removal, Oyerinde stated that it was “not necessary” and urged the government to focus on fixing the refineries and making them operational before the removal of the petrol subsidy.
“Already, experts and the polity at large have frowned against the loan facility and have proposed definitive approaches including fixing the refineries,” he said.
He also called on the government to investigate the subsidy regime to expose any alleged corruption associated with it. Oyerinde believes that fixing the refineries would be a more traditional approach to addressing the issue of subsidy removal.
