Manufacturers, NECA, PDP Kick Against FG Decision to Raise VAT

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The federal government decision to raise the Value Added Tax (VAT) from five percent to 7.2 percent has been rejected by members of the Manufacturers Association of Nigeria (MAN), Lagos Chamber of Commerce and Industry (LCCI), Nigeria Employers’ Consultative Association (NECA).
The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) is also against the plan announced by the federal government Wednesday.

MAN, LCCI, NECA NACCIMA said the increase will have negative impact on the national economy and also the real sector.
THISDAY reports MAN President, Mansur Ahmed, saying that the current proposal to increase VAT would worsen the current economic hardship Nigerians are experiencing at the moment.
Ahmed instead urged the federal government to pursue the initial plan of the Federal Internal Revenue Service (FIRS) to expand the tax base by ensuring that more Nigerians and corporate entities are made to pay taxes.
THISDAY report quotes the MAN President saying, “Increasing VAT by nearly 50 per cent would worsen the problem of high cost of doing business in the country. It will also reduce the effective demand of consumers in purchasing goods and services. This will not augur well with manufacturers who already have more unsold items in their warehouses due to low purchasing power of Nigerian consumers.
“Therefore, efforts should be directed at expanding the tax base. This effort has not been exhausted.”
THISDAY also reports the Director General of the LCCI, Muda Yusuf, saying that the new proposal would only worsen the businesses environment that is already challenging for investors.
Yusuf said, “And knowing the way VAT is operated in this environment, it will not count whether the product is an input for production or not. Because practically everything is subjected to VAT unlike what happens in other climes where VAT is treated purely as a consumption tax.
“So, clearly, this is going to be an additional big burden on businesses, especially because it is difficult to transfer cost to the consumers because of the prevailing weak purchasing power of Nigerian consumers. It affects investors negatively when cost increase and the ability to transfer the additional cost to consumers is weak. So, we are likely to see an erosion of profit margins. And for businesses that are already struggling will begin to declare losses. So, it is going to pose a serious challenge.”
The National President of NACCIMA, Hajiya Saratu Iya Aliyu, also said “With this in mind, the association is of the view that an increase in the current VAT rate will likely have multiple negative effects starting with the initial increase in the final prices of goods and services. There will also likely be an increase in the cost of production; a rise in inflation; an erosion of the purchasing power of the average Nigerian; the reduced competitiveness of Nigerian goods and services in international markets; and a rise in unemployment as the real sector adjusts to rising costs of production”
The People’s Democratic Party (PDP) had also in a statement issued by the Publicity Secretary, Mr Kola Ologbondiyan called on the federal government to drop the plan on VAT increase.,
He said in statement, “The PDP insists that the decision to increase VAT on already impoverished citizens is in bad faith and cannot be justified under any guise”.

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