VAT Hike: Businesses Will Shut Down, GDP Will Shrink — Experts
Experts and groups have warned that many businesses will shut down operations and many Nigerians will become poorer if the recently aanounced VAT increase is implemented.
One of such is the Nigeria Employers’ Consultative Association. The group posited that the VAT hike from five per cent to 7.2 per cent will lead to closure of many businesses.
Also the Head of Tax and Corporate Advisory Services at PricewaterhouseCoopers, Taiwo Oyedele, said the new VAT rate would shrink the GDP growth and disposable income of Nigerians.
The Director-General of NECA, Mr Timothy Olawale, noted that the timing of the increase in VAT rate was wrong, stressing that the government ought to support businesses in reducing the alarming unemployment rate in the country.
Recall that the Minister of Finance, Budget and National Planning, Zainab Ahmed, on Wednesday announced the VAT rate increase at the end of the Federal Executive Council meeting.
“If this new VAT rate is implemented, the purchasing power of the citizens would have been reduced, sales of goods and services will reduce and inventories for business will be high and could lead to closure of businesses that ought to be supported by government in reducing unemployment rate that is currently alarming.
“Furthermore, the benefits of the recently signed national minimum wage of N30,000 would be neutralised by the proposed increase in the VAT, further reducing the purchasing power of the citizens, leading to increase in prices of goods and services. It will result in upward movement of the inflation rate, and further contraction of the economy.”
Olawale, who said that in the event that the government must increase VAT rate against the will of the people, it should have been limited to luxury or ostentatious goods.
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