The Organised Private Sector, (OPS) operating under aegis of Nigeria Employers’ Consultative Association (NECA), has said that for Federal Government Economic Recovery and Growth Plan (ERGP) to succeed, it needs to lower the Company Income Tax (CIT).
OPS noted that by cutting the tax, Nigeria is going to be in the league of other global economies like Ghana, Malaysia, South Africa, Indonesia, Cote D’ Ivoire, China, Russia, United Kingdom which tax between 20 and 25 percent as against Nigeria’s 30 percent in addition to 2 percent education tax.
Aside, the government needs to stay focused in the implementation floating exchange rate system, privatisation or sale of certain national assets.
The NECA President, Larry Ettah, who advanced the OPS’s position after association’s council meeting which focused on Nigeria’s economic direction, in Lagos, argued that the CIT rate is not only suffocating companies which are struggling to keep afloat, but also acts as a disincentive to investors- local and foreign which the economy is in dire need of.
Ettah said NECA conducted a comprehensive research of company income tax, personal income and VAT/sales tax rates of 30 global economies and found out that Nigeria’s CIT rate of 30 percent (plus 2 percent) education tax is on the high side, adding that that it should be reviewed downwards to 20-25 percent.
On the other hand, NECA boss noted “it is incontrovertible that Nigeria’s 5 percent Value Added Tax rate is far below that of comparator countries and at an appropriate time may be increased to 10 percent”.
The OPS also emphasised the need for the Federal Government to downplay its level of borrowing and rather look inwards to fund the economy by privatising or selling some national assets notwithstanding the controversy around the idea.
According to Ettah, the sustainable funding strategy for the Nigerian economy at this time should focus on private investment and foreign direct investment rather than concentrating on unsustainable borrowings.
“The issue of privatisation or asset sales has been controversial based on legitimate concerns that such policy may provide an avenue for persons or groups to “corner” precious national assets and further the entrenchment of monopolies and oligopolies in our national economy. In spite of these concerns, which we share, we cannot refuse to examine asset sales as an option in funding the economy in this recession.” Ettah said.
In particular, the OPS listed the conversion of the upstream oil sector JVs into incorporated JVs with the government reducing its share in those IJVs as a means of improving governance and raising resources for infrastructure, full privatisation of government-owned refineries and privatisation or long concessions of all federal government-owned airports
Other options, according to NECA, selling not more than 20 percent of Federal Government’s holding in Nigeria Liquefied Natural Gas (NLNG) to existing private investors in the company and the expansion of the capital market through listing of privatised assets on the Nigerian Stock Exchange (NSE).
Explaining that the economy urgent needs the injection of private capitals, Ettah said “one of the major deficiencies of Nigeria’s current policy is the “body language” that suggests an aversion for private capital and investment and a seeming preference for government control of the economy.
According to him, evidence from most of the countries examined, especially Saudi Arabia, Egypt, Indonesia and Russia indicates the opposite, adding that most oil dependent economies have anchored their post-oil strategies on private capital and investment in oil and non-oil activities.
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