The Nigeria Employers’ Consultative Association says the IMF’s call on the Federal Government to increase taxes in order to reduce borrowing will affect economic growth and worse the country’s plight.
The Director General of NECA, Mr. Wale Oyerinde, in a statement on Sunday said such an economic decision might appear to be in favour of the government since it would drive up its revenues.
He, however, stressed that hiking taxes would have negative effects on households, businesses, and the economy in general.
“The call by the IMF on the Federal Government to increase taxes in order to reduce borrowing spells nothing but disaster for an economy struggling to stay afloat. Yes, such an economic decision may appear to be in favour of the government, since it would drive up its revenues. However, any attempt to hike taxes would have a negative impact on households, individuals, and businesses. This cannot be overstated.”
During the ongoing IMF/World Bank Spring Meetings in the United States, the Washington-based lender reiterated its advice to Nigeria to step up efforts to bring more people into the tax net, increase taxes, and reduce the country’s debt burden.
But Oyerinde said imposing additional taxes on an overwhelmed private sector could 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.”
According to the NECA boss, a higher tax regime in an environment with rising inflation is not the best decision adding that tax economics encompasses more than just public funds.
He said imposing more taxes would weaken the purchasing power of individuals and stifle consumption.