The Nigeria Employers’ Consultative Association (NECA) has warned against the implementation of the 7.2 per cent Value Added Tax (VAT) approved by the Federal Executive Council, saying it will make nonsense of the new Minimum Wage signed into law by President Muhammadu Buhari.
The employers group gave the warning in a statement on Thursday, cautioning the Federal Government against the timing of the announced increase of VAT from 5% to 7.2 per cent.
“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,” the Director-General, NECA, Mr Timothy Olawale, said.
According to him, the purchasing power of the citizens would be reduced, sales of goods and services would reduce and inventories for business would be high.
These, he said, could lead to closure of businesses that ought to be supported by government in reducing the alarming unemployment rate in the country.
It would be recalled that the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, announced the approval of the new VAT rate after the FEC meeting in Abuja on Wednesday.
The minister, who also disclosed that government was making consultations on when the new VAT regime would take off, hinted that stakeholders, including the National Assembly and the states, would have to agree on the date.
The minister further said that the VAT Act would also have to be amended by the National Assembly before the commencement of the new rate, which she said could be sometime in 2020.