NACCIMA, NECA Fault Senate’s Passage of Finance Bill

Two key members of the organised private sector (OPS), the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), and Nigerian Employers Consultative Association ( NECA), have raised objections to the Finance Bill (2019) passed into law last week by the Senate, saying that it is an indication that the legislative arm along with its executive counterpart are unmindful of the hardship Nigerians are going through.

NACCIMA and NECA, which spoke separately to THISDAY, said the Finance Bill, which includes increase in the value-added-tax (VAT) from five per cent to 7.5 per cent, will impact negatively on the quality of lives of Nigerians because its spiral effects, which include hike in prices of commodities, adding that economic indices do not justify any upward adjustment of the consumer tax. ,

President Muhammadu Buhari had in October, presented the bill to the jointsitting of the National Assembly seeking to increase VAT from five per cent to 7.5 per cent.

In its reaction to the passage of the bill, NACCIMA commended “the leadership and members of the Senate for the accelerated attention given to the Finance Bill (2019), which aims to promote fiscal equity, align local laws with global best practices, introduce tax incentives for investments in infrastructure and the capital market as well as support small businesses in line with the ongoing Ease of Doing Business reforms.”

However, while noting that the bill exempts MSMEs from VAT registration, pegging it below N25 million in turnover per year, it objected to the increase in VAT.

It said the country’s economic growth trajectory had not fully recovered from the 2016 economic recession, adding that the nation’s Gross Domestic Product (GDP) growth rate per quarter has been 1.74 per cent on average (not exceeding 2.4 per cent at its highest point), since the country regained positive economic growth in 2017.

Also, according to NACCIMA, inflation rate is still high, and has been revolving around 11.3 per cent since May 2018, even as double-digit inflation is still driven by high food prices, while the Food Price Index has been revolving around 13.4 per cent during the same period.

Unemployment rate as at the third quarter of 2018, stood at 23.1 per cent an estimated 20.9 million people are unemployed.

“With this in mind, the association counsels that an increase in the current VAT rate is certain to have multiple negative effects starting with the initial increase in the final price of goods and services; 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,” said the National President of NACCIMA , Hajiya Saratu Iya Aliyu.

“While noting the federal government’s need to fund the implementation of the national budget, especially, in line with the new minimum wage structure, the association further counsels that expanding the tax net, implementing tax reform and ensuring robust tax administration will also increase government revenues with less negative impact on the indicators listed above.

“Recent reports from the Federal Inland Revenue Service (FIRS) show that these activities are yielding fruit. To further emphasise this position, it is relevant to note that the expansion of, or the increase in the productivity of the existing tax base by 2.1 per cent will provide the same expected revenue as the proposed increase in VAT rates,” she added.

On its part, NECA, which said the bill passage “came as a shock to stakeholders as they expected the Senate to take into consideration the various submissions by them,” described the bill as anti-people.

The Director-General of the association, Mr. Timothy Olawale, stated “we received with shock the news that the ‘people's Senate’, without painstakingly going through various memoranda submitted by stakeholders on the Finance Bill and following the due process of law making, passed the Finance Bill into law, thereby rubber-stamping the increase in VAT, Excise Duty and Stamp Duty amongst other anti-people provisions, with the direct consequences being Nigerians having to pay more for goods and services.”

Government, he said, “especially the National Assembly, has condemned the citizenry to a life of servitude to fuel their appetite for easy life. The National Assembly is by implication asking Nigerians that are already passing through tough times economically to prepare for a more harrowing experience with eroded purchasing power in the face of rising inflation.

"While an increase of 2.5 per cent may appear small, it is in fact a 50 per cent increase in VAT cost to many businesses and consumers. The negative impact will include increase in prices leading to higher inflation, less disposable income for already poor households resulting in lower consumption and a decline in GDP growth rate. Also, because input VAT on capital expenditure is not allowed as a credit in Nigeria, the cost of real investments will go up and more people will evade the tax as compliant entities become less competitive.

“The Senate is expected to be the conscience of the nation as they are representatives of the people. It is, thus, expected that the interest of the people will guide their actions. It is worrisome that the Senate will treat Nigerians and the business community with contempt by not taking into consideration their views and concerns as regards the Finance Bill, even when the Senate itself called for memoranda. It appears that Nigerians are becoming hostage to those they elected to serve them.

“The only succour left is to hope that the pro-people disposition of President Buhari will rise to the defence of the people by declining assent to the bill as presently passed by the Senate, notwithstanding the fact that the bill emanated from the presidency in the first instance. The president must insist that due process be followed in the passage of the bill. The nation cannot afford to sacrifice due process and long term survival of its citizens on the altar of political expediency," he added.