NECA Warns Over Negative Impact Of Tax Hike On Nigeria Businesses

The Nigeria Employers’ Consultative Association (NECA) says the call by the International Monetary Fund (IMF) urging the federal government to increase taxes in order to reduce borrowing spells nothing but disaster for an economy struggling to stay afloat.

The association said such an economic decision may appear to be in favour of the government, since it would drive up its revenues.

A statement by the Director General of NECA, Mr Adewale-Smatt Oyerinde, stressed that any attempt to hike taxes would have a negative impact on households, individuals and businesses. This cannot be overstated.

“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.

“In an environment where individuals and corporate entities provide services and infrastructure that should normally be provided by the government, the best the government can do is to support and ease their burdens rather than considering any plans towards making them pay for its inefficiencies and fiscal indiscipline. Frankly, it is not every recommendation from development agencies that should be implemented without considering the peculiarity of the context in which such policies will be implemented.

“Many a time the emphasis is always on revenue mobilisation when the conversation about tax increases is being canvassed but It is instructive to note that tax economics encompasses more than just public funds. For any discerning government, a higher tax in an environment with rising inflation is not the best decision. More taxes, of course, will weaken the purchasing power of individuals and stifle consumption, with attendant consequences for social cohesion.”

He explained that, “Countries tend to reduce taxes during economic lull but increase the same during a boom. Unfortunately, we are not in the latter position. Any attempt to consider tax hike would create more burdens on tax payers. It may defeat any attempt to widen the tax net as tax payers would consider tax avoidance measures. There will be massive capital flight, and the drive for direct foreign investment could be defeated.

According to him, “Government should consider widening its tax net as we had posited on my many occasions and at various forums. We support the IMF’s recommendation to the federal government to consider widening its fiscal net. It is the way to go. In addition, one of the problems government at all levels in Nigeria has is the rising cost of Governance. If the cost Governance can be addressed decisively, it has the tendency to reduce borrowing since recurrent expenditure would automatically decrease”, he said.