More Taxes Will Lead to Massive Capital Flight—NECA Warns FG

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By Adedapo Adesanya

The Nigeria Employers’ Consultative Association (NECA) has warned the Nigerian government against heeding the advice of the International Monetary Fund (IMF) on tax increment, emphasising that such an attempt could backfire and lead to a negative impact on households, individuals, and businesses, which are already impacted by the current economic climate.

The organisation’s Director-General, Mr Adewale-Smatt Oyerinde, in a statement, advised the government to consider expanding the country’s tax net rather than increasing the tax rates.

The global lender had recommended to the federal government to raise taxes in the country so as to jerk up revenue and cut down on borrowing.

The Bretton Woods institution last year recommended a 100 per cent increment to Value Added Tax (VAT) from the current 7.5 per cent to 15 per cent.

The fund, in its latest Fiscal Monitor titled, On the path to Policy Normalisation, released recently, noted that Nigeria’s debt was projected to continue to rise and urged the government to remove fuel subsidies and direct them to health and education.

But Mr Oyerinde kicked and said, “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.

“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.”

The NECA DG said, however, that government should consider widening its tax net as the association had posited on many occasions and at various forums.

He also said that the association was in support of the IMF’s recommendation to the government to consider widening its fiscal net, saying 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 of governance can be addressed decisively, it has the tendency to reduce borrowing since recurrent expenditure will automatically decrease, “ he said.

Mr Oyerinde said that the $800 million loan to serve as palliatives in view of the planned removal of subsidy was not necessary.

He urged, rather, that government must give attention to fixing the refineries and making them operational in the coming months 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.

“Also, investigate without delay the subsidy regime with the view to exposing the alleged corruption associated with it; this should not be a difficult thing for the government to do,” he added.

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