VAT Increase: Economy Will Be More Vulnerable, Manufacturers Warn Nigerian Govt
The Manufacturers Association of Nigeria (MAN) has asked the Federal Government to tread with caution in the drive for improved revenue.
The Director-General of MAN, Mr Segun Ajayi-Kadir, said this in a statement on Wednesday while reacting to the plan by the government to increase the Value Added Tax (VAT).
Officials of the Federal Ministry of Finance had defended the Medium-Term Expenditure Framework (MTEF) that VAT be increased by 50 per cent during a presentation in the Senate.
Ajayi-Kadir, however, said such policy was not ‘manufacturing friendly’, adding that implementing it would have a negative effect as a result of the planned increase in minimum wage.
“As plausible as the recommendation to increase VAT may look, implementing it at this time would boomerang because the timing is inappropriate, especially at a time when the minimum wage of N30,000 was just agreed upon,” he stated.
The MAN DG added, “This could send a wrong signal that the government is not sensitive to the plight of the low- and middle-income earners, who are clearly in the majority. The Nigerian economy will be in a more vulnerable state if VAT is increased.
“No controversy, the burden of the tax would be shifted to the Nigerian consumers that are already struggling, the economy would certainly experience demand crunch, inventory of unsold items would soar, profitability of manufacturing concerns would be negatively impacted, many factories will witness serious downturn or wind down operations.”
Ajayi-Kadiri, therefore, advised the government to widen the tax net rather than increase the rate in order to meet the growing need for more revenue to address the development objective of the country.
He also appealed to the government not to increase the VAT at this time but consider the implementation of the afore-mentioned tax specific recommendations.
The MAN DG asked the government to continue to ramp-up support for the manufacturing sector in the best interest of the people.