Barely 24 hours after the Federal Government unitarily approved 7.2 per cent as new Value Added Tax rate for the country, up from the current five per cent, the leadership of the Nigeria Employers’ Consultative Association (NECA) has fired the first shot.
Literally, VAT is a consumption tax payable on goods and services consumed by individuals, government agencies and business organisations.
The organized private sector body argued that the sudden hike in VAT without any form of consultations by the Federal Executive Council will make nonsense of the recent increase in minimum wage which is yet to takeoff due to inability of the government to agree clear terms of engagements.
In a statement Thursday, NECA clearly warned the Federal Government saying the timing makes the matter resemble giving with left hand and collecting with right hand in an economy with the lowest purchasing power.
The group added that the timing of the announced increase of VAT from five per cent to 7.2 per cent, which was approved by the Federal Executive Council on Wednesday shows that government was never ready to pay the new minimum wage in the first instance.
The statement signed by the Director-General, NECA, Mr Timothy Olawale argued further that “The benefits of the recently signed National Minimum Wage of N30,000 would be neutralised by the proposed increase in the VAT, further reduce the purchasing power of the citizens, leading to increase in prices of goods and services, resulting in upward movement of the inflation rate, and further contraction of the economy.”
Olawale submitted that since the purchasing power of the citizens would be reduced, sales of goods and services would reduce and inventories for business would be high, adding that this could lead to closure of businesses that ought to be supported by government in reducing the alarming unemployment rate in the country.
Business Hilights recalled that while announcing the nee VAT regime shortly after the FEC meeting at State House, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said consultations were in process over when the new rate would apply, thus attempting to dribble Nigerians that it was not targeted at shortchanging the new minimum wage after all.
However, she hinted that ahead of its introduction sometime next year, the law requires that the VAT Act would have to be amended by the National Assembly.
