Centre for the Promotion of Private Enterprise (CPPE) has said some tax and import duty provisions in the 2023 Fiscal Policy measures of the federal government would significantly hurt the economy and worsen the de-industrialisation worries in the Nigerian economy.
The CEO of CPPE, Dr. Muda Yusuf, stated that the construction and transportation sectors are also vulnerable to fiscal policy-induced downside risks.
According to him, some of the measures could exacerbate inflationary pressures which are detrimental to economic growth and manufacturing, construction and transportation sectors.
“It is double whammy for economic players to contend with a regime of high import duty, prohibitive tax rates amid a depreciating currency.
“Fiscal policy measures must seek to ensure a good balance between objectives of revenue generation, boosting domestic production, enhancing the welfare of citizens, promoting economic growth, deepening economic inclusion, facilitating job creation and recognizing societal ethos, beliefs and values,” he stressed.
On excise duty on beverage, drinks and wines, Yusuf noted that, Ad-valorem tax is based on the value of the product, which makes the impact even more injurious to industrialists.
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He noted that, sustaining current investments in these sectors would be a herculean task, saying, these policy measures failed to reckon with the multifarious challenges which industry operators are currently grappling with.
He stated that, this will lead to drop in sales for investors in the sector; negative effect on tax revenue from the sector; loss of direct and indirect jobs which could be in a couple of millions; millions of farmers supply local inputs such as grains, as farmers to may lose their livelihoods; risk of decline in profitability and shareholder value; and elevated risk of smuggling of the products.
On 40 per cent import duty on vehicles, he stated that, it is difficult to justify this high import duty on vehicles as Nigeria is about 90 per cent dependent on road transportation which underscore the importance of motor vehicles in the economy.
He added that, there is an increasing affordability problem for citizens with regard to vehicle acquisition, especially, by the middle class of the Nigerian society.
“Cost of locally assembled vehicles are beyond the reach of most Nigerians, contrary to the assurance given by government at the inception of the auto policy.
“There is limited access to credit for vehicle purchase by Nigerians. Over 90 per cent of purchases are done out of pocket, which is extremely challenging. And where the credit facilities exist, the interest rates are outrageous, between 25 to 30 per cent.
“The economy has experienced huge exchange rate depreciation which had already exacerbated vehicle acquisition cost in the first place,” he pointed out
He further said: “it is therefore insensitive of policy makers to impose a whooping 40 per cent import duty on vehicles in an economy where there is no mass transit system and where vehicle ownership has become a necessity, especially for the middle class.
“There is an additional two per cent and four per cent green tax, depending on the engine capacity of the vehicle. This translates to import duty of 42 per cent or 44 per cent depending on the engine capacity of the vehicle.”
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