Increasing IGR, VAT will impoverish Nigerians – NECA
On Thursday, President Muhammadu Buhari asked Governors of the 36 states to raise their internally generated Revenues and the Value Added Tax in the next four years. He said this would help the states meet the challenges of providing infrastructure and the funding needed to provide equipment for fighting insecurity.
The President, however, told the Governors to raise the taxes in a way that there would be no disruption to Business operations
On the other hand, Nigeria Employers’ Consultative Association, Lagos Chamber of Commerce and Industry, Association of Telecommunication Companies of Nigeria and the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture have cautioned the government against increasing Tax and VAT, saying it would add to Nigerians’ burden.
They advised the government to strike a balance between its desire to raise IGR and VAT with Job creation, rather than contemplating VAT ad Tax increase, the FG should increase the Taxes of the Rich and Politicians. But at the NEC chaired by Vice-President Yemi Osinbajo, on behalf of the President, Buhari insisted that without IGR and VAT increment, it would be difficult for the state governments to meet their needs.
He said, “Going forward, states must in the next four years find ways to increase internally generated revenues, improve Value Added Tax collection and increase agricultural output without disrupting business activities.
“I also want you to work with the federal agencies and the service providers in ensuring that broadband infrastructure is made available all over the country. Information and Communications Technology is the future of work and we must not allow ourselves to be left behind.
“Let me restate the high expectations on NEC as a veritable source of articulating policies and programmes that are expected to drive growth and development, secure our environment and take the country to the next level. Your Excellencies, the challenges that confront us in the next few years, especially in the areas of security, human capital development and employment for our youths are monumental and historic. But we are more than equal to the task.”
The Federal Government had to intervene through the offer of bailouts to the states, restructuring of loans and Paris Club Refund, totalling N2tn to reflate the economies of the states.
The financial situation in many of the states today is said to be worse than the case in 2015, amid dwindling revenue shares from the Federation Account.
On security, the President called for collaboration between the Federal Government and the states, while he also told the governors to focus more on education, health and agriculture in the years ahead.
Buhari added, “While the Federal Government has primary responsibility for security and will not shy away from it, the states also have a critical role to play; in particular Your Excellencies, as state governors. You can definitely make a difference, not just by assisting the security agencies in your respective states, but also by keenly pursuing policies and programmes that forestall communal, tribal, religious and societal conflicts; policies and programmes that promote education, information, dispute resolution, vocational training and youth employment.
“I have no doubt that if these four areas – security, education, health and agriculture – are actively implemented and closely monitored by NEC and the Nigeria Governors’ Forum, we shall in the near future see a more peaceful and prosperous Nigeria.”
The President also asked the governors to run an inclusive government, irrespective of the political party in control of power in their respective domains.
He added, “Your excellencies, the Federal Government in the last four years has demonstrated unwavering inclusiveness in dealing with every state, notwithstanding the political leanings of the governor or the predominant party in power at the state level.
“I want this to be your model at the state level. No matter which party we belong to, let us shun divisive policies and join hands together for the uplift of our people.”
Between 2015 and this year, the NEC held 38 meetings and passed 173 resolutions dealing with areas such as agriculture/solid minerals; investment promotion/industrialisation; monetary and fiscal stability; health and education; revenue generation; security and support for states.
According to Buhari, the resolutions “are either implemented already or at different stages of implementation across the country.
“Together, they have proved to be of utmost importance in dictating the pace of national development.”
In his remarks at the meeting, Osinbajo said the NEC had been playing its role, helping the government to develop and implementing economic policies.
Increasing IGR, VAT‘ll impoverish Nigerians – NECA
In its reaction, NECA said any attempt to further increase IGR and VAT would have a backlash on Nigerians, most especially the common man.
The association said though the President might mean well, given the current economic situation in the country, such action “is misplaced and will do more harm to the already impoverished citizens.”
The Director-General of NECA, Mr. Timothy Olawale, who said this in a telephone interview with one of our correspondents, said what the states should do was to bring more people into the tax net, reduce the cost of governance by cutting down on retinue of aides and block leakages.
He noted that if businesses were overburdened with illegal levies and rates outside the ones recognised by law, they would pass these to consumers ultimately.
He said, “The President meant well, but it is a misplaced idea and will do more harm to the already impoverished citizens than any good. Who will be at the receiving end of increased revenue drive if not the common man?
“Secondly, even if businesses are taxed more through likely illegal levies and rates outside the provisions of the law, they will naturally pass the cost to the customers whose purchasing power is already at the lowest ebb.
“What needed to be done by the state governments is to expand the tax net to capture more citizens as it’s been posited, arguably that less than 40 per cent of Nigerians are tax compliant.
“They should also put mechanisms in place to eliminate leakages as a large chunk of the IGR realised finds its way into personal coffers.
“Finally, as reiterated over and over again, they should drastically cut the cost of governance. Many unproductive retinues of aides kept by them at prohibitive cost to the state are needless.
“Besides, ingenious idea of corrupt practices in the name of security votes and frivolous foreign travels by state government functionaries are veritable examples of cuttings in avoidable expenses draining state government purses.”
Also, the President, LCCI, Mr Babatunde Ruwase, expressed the opinion that the President was just advising the states to do more as there was separation of powers between the states and the Federal Government, whereby the federal would not mandate states to impose taxes.
He noted however that it would be difficult for states to impose additional taxes because people were already overtaxed. He maintained that even though people were overtaxed, Nigeria’s tax-to-Gross Domestic Product ratio was still low because there were people that needed to pay more taxes. Such people, according to him, include the political office holders, who are living large and are paying lower taxes than they are supposed to pay.
He advised the government to rather reduce the cost of governance, adding that members of the political class were still going about in convoys of expensive cars, still living opulent lifestyles. He said, “Some of them have walked away with huge severance pay package while pensioners have gone for months without pay.
“The government should let us know how much political office holders are paying as taxes. There was one of them that aspired to be president and he only paid N400, 000 as tax in four years. That is less than what junior office workers are paying.”
Ruwase recommended making the environment conducive to productive ventures, saying that businesses were already burdened with paying for energy, providing water and battling poor roads.
If the government fixed infrastructure, companies could thrive and be able to pay taxes, he said, adding that many firms had gone under because of infrastructural challenges.
The National President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Alhaja Saratu Aliyu, suggested that the wealthy should be made to pay more taxes, adding that if states imposed more taxes, the burden would be borne by the ordinary man.
She said the economy was not good for the common man. They should tax the wealthy and also look for other forms of revenue than taxes.
Speaking in the same vein, the President, ATCON, Mr Olusola Teniola, said it was important for President Buhari and the state governors to understand the need to balance their desire to increase taxes and create jobs.
According to him, when jobs are created, the tax net will automatically expand.
While noting that the Federal Government had recognised the fact that the only way to grow the economy was through technology, Teniola said taxing investments such as telecom infrastructure was not the best way to increase IGR.
ATCON president said, “It is important that the governors recognise that IGR shouldn’t be just based on taxing investments upfront. It means that Right of Way should be priced at N145 per linear metres because that will encourage investments. The laying of optic fibres and requisite application of broadband will create jobs and those jobs will increase productivity because more taxes will be generated and people will spend more money.
“The notion that we should see telecoms as cash cow should no longer be the case. It should be seen as a tool for IGR development. We plead with the governors to take the cue from Mr President. When you look at countries like Rwanda, Egypt and Ghana are far ahead of us in terms of broadband infrastructure, which is improving the efficiency in their countries. We need to also introduce Business Process Outsourcing so that our youths can be employed quickly. ICT should be treated as the new black gold for Nigeria.”
However, Registrar, Institute of Finance and Control of Nigeria, Mr Godwin Eohoi, on Thursday, said there was the need for the economy to be restructured in such a way that would enable states to have control of their resources.
He said, “We need to focus on policies that support backward and forward integration and seek to make agriculture as a business rather than just for self-sufficiency.
“Nigeria is huge economic potential outside oil sector which are largely untapped. We have always been relying on a mono-product commodity called oil as a source of income, notwithstanding the fact that oil constitutes only 10 per cent of our Gross Domestic Product.
“There is potential for growth in non-oil export in most states and virtually all the states have one form of economic competitive advantage or the other.
“For example, virtually the whole of Zamfara State is sitting on gold and diamond, largely untapped with little going to illegal miners.
“If the states are given the powers to control their resources, it would help promote economic competition.”
Reacting earlier to the President’s call on them to prioritise security, the Nigeria Governors’ Forum said that it would set up a security committee at the NEC level as part of its efforts to address the growing security challenges in some parts of the country.
The NGF Chairman, Dr Kayode Fayemi, read the group’s communiqué issued at the end of the forum meeting in Abuja. The communiqué was made available to one of our correspondents on Thursday.
He said, “The forum resolved to set up a security committee at the National Economic Council level and retain security as a reoccurring item on its agenda for the foreseeable future, in order to continue to monitor development on security situation.”
According to him, the agenda of the new leadership of NGF was set to include security, human capital development, job creation, constitutional reform particularly devolution of power.
He said that the set agenda would include strengthening of the NGF secretariat to support economic advisory, policy advisory, knowledge management and public financial management.
“Members pledged to support the new leadership to drive the mandate of the Forum to promote collaboration and consensus among governors on matters of public policy.”
Fayemi said the forum did not discuss the issue of state police. He, however, noted that state police was an issue of interest to Nigerians and the governors.
According to him, the forum would continue to review its position on state police and make its stand known to the public.
The NGF boss also said members of the forum equally resolved to re-launch its flagship State Peer Review Mechanism programme designed to assist states foster good governance.
He stated that the strategy was also to accelerate the rate of development through periodic reviews of progress made by state governments.
Fayemi said the NGF members also agreed to hold a one-day interactive session with the World Bank and the Bill and Melinda Gates Foundation on ongoing development across states in Nigeria on June 26.
He said, “The event will also host an Internally Generated Revenue retreat with the Joint Tax Board and chairmen of the Internal Revenue Service of states.”
The NGF boss also said the forum received a presentation on sub-national Investment Promotion from the Chief Executive Officer of the Nigerian Investment Promotion Commission, Ms Yewande Sadiku.
According to him, the governors at the end pledged to work with the commission to strengthen investors’ engagements and reached a consensus to promote strategic insights into states’ competitiveness advantages.
Other governors present at the meeting were the NGF Deputy Chairman, Aminu Tambulwal of Sokoto State; and Chief Emeka Ihedioha of Imo State.
The other governors present included those of Lagos, Borno, Osun, Kano, Ondo, Jigawa, Kebbi, Kaduna, Kogi, Plateau, Ebonyi, Nasarawa, Ogun, Edo, Gombe, Niger, Bayelsa and Oyo, as well as deputy governors of Katsina, Zamfara, and Enugu.