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|Wider Tax Net, Not Rate Increase’ll Raise Government Revenue –olawale, NECA DG by Innerkonsult: 3:34pm On Mar 05, 2019|
The Federal Government’s intention to generate almost double of the amount realised last year in tax revenue may set it on collision path with the Organised Private Sector (OPS). The concern for a possible friction stems from the nation’s current economic situation, poor infrastructure, and difficulties in accessing funds among others, which members of the OPS are sounding a serious warning that the Federal Government would be making a mistake if it intends to generate the target revenue through tax increases.
The new Director General of the Nigeria Employers Consultative Association (NECA), Mr. Timothy Olawale, lamented that businesses in Nigeria are presently encumbered with the payment of over 55 different taxes at the three levels of government. He also speaks on how banks have failed playing their role of ensuring small businesses thrive. Olawale, while expressing the readiness of the OPS to pay the new Minimum Wage of N30,000, said that anything below that is criminal. The NECA DG, among other issues, expressed worry over the nation’s rising debt profile, the Economic Recovery Growth Plan (ERGP) among other issues in the economy.
Excerpts: Support for new minimum wage
We stuck out our neck on the issue of new minimum wage because it came out as a result of a process in which we are actively involved. We were actively part of the discussion, decision and we agreed and believed in the discussion of the tripartite committee with every sense of responsibility coupled with the fact that we believe in corporate responsibility. The second reason is that when you think about the welfare of workers, we believe N30,000 is ideal and that anything below that is inappropriate. Employers have the responsibility of taking care of their employees before they can increase productivity. You are not making life meaningful for them if you don’t pay them good salary.
Is N30,000 really enough for workers?
We all know the value and worth of money in the present economy. The question we should ask ourselves is how far will the N30,000 go in taking care of a worker and his or her entire family. By the time a worker goes to and from his/her workplace everyday, that N30,000 will substantially have gone. Don’t forget that there are also other basic needs like shelter, feeding, medicals, education for the children. So when you benchmark all these with the said amount, it can’t go far. And I want to say personally that anything below that is criminal.
Effect of N30,000 minimum wage on the economy
Yes, there is going to be a consequential effect, but it is going to be minimal and it is going to be controlled. One of the effects is that there is insufficient enlightenment to the general public to let them know that the fact that there is new minimum wage now, does not mean that everywhere will be awash with money. Because based on that belief, there will be an increase in the prices of goods and services. Everyone, both market women and men, will want to benefit directly from the new minimum wage. And when that happens, the effect is that workers’ welfare will be totally lost. What it means is that the new minimum wage will not have any positive effect on the workers. The disadvantage of this is the prolonged process in arriving at the new minimum wage. Because everybody that doesn’t even know what minimum wage is all about before are aware now and are anticipating when it will take effect so that they will also benefit. It is so unfortunate, but that is Nigerians for you.
OPS complying with new minimum wage
There is no reason all members of the OPS should not be able to pay N30,000 minimum wage. This is because they all agreed after due consultation. So, we are saying authoritatively that all members of the OPS will implement N30,000. The simple truth is that 70 per cent of the organised labour is paying way above N30,000 as minimum wage. So, the consequential impact is very minimal, if not nil, because it is supposed to affect the chain or review, where your benchmark is below N30,000. So, if you are paying way above N30,000, you need not bother, except if you want to enter what we call a ‘sweetheart agreement’ with your workers and you decide to raise their salaries. As we speak, some sectors have started negotiating without waiting for government’s decision on the N30,000 proposal. My concern, however, is the informal sector – the Small and Medium Enterprises (SMEs), which are struggling and don’t have enough support from the government and its agencies to survive. The question is: are they well positioned to absorb the effect of N30,000? Can they implement it? We have encouraged them to embrace the plan of relevant bodies like the International Labour Organisation (ILO), which NECA is a part of, to help them transit from informal to formal sector. This will help their businesses and deepen their access to capital. Also, they need to engage their workers because the major problem that has reflected in the rate of unemployment is that what Nigerians are even looking for is to be able to leave their houses and have a means of survival in the first instance. Majority of our teeming population are out of jobs; well over 30 million Nigerians are said to be out of job. Abraham Maslow’s hierarchy of needs talks about subsistence level. In other words, the physiological need is: ‘Let me even have somewhere to go and have something to sustain myself and my family.’ It is after meeting that need that you start thinking of how to improve on it and then maybe the issue of minimum wage will arise. Our focus – and what we have always told the government – is for us to have a situation where majority are gainfully employed in the first instance. Then, we can talk about improving on it. We have also advised the SMEs to broaden their scope of operation so that more and more people can get into the employment net through their activities. Then, you can bother about the issue of minimum wage. It also came up in our discussion at the National Minimum Wage Tripartite Committee about the issue of enforcement. Because it is one thing to have a law, it is another thing to enforce it.
NACCIMA backing out of agreement
On the unfortunate response from the representative of NACCIMA, the person did not speak on behalf of NACCIMA as a body. The position has since been denied by the body she represented. They said they never sent her. The speaker said she was on her own and that she was never sent. And for her to have said that, it is only her that can explain. They also said the position of the OPS is okay by them and that they are in line with it.
There is no doubt that multiple taxation is killing businesses in the country. Businesses in Nigeria are encumbered with the payment of over 55 different taxes at the three levels of government. The incidence of double taxation, particularly consumption tax, has assumed a very dangerous dimension. We expect the government to intervene through an appropriate statutory or policy declaration. Government should not make mistakes of generating revenue through tax increase. We know that government will want to meet up with its revenue requirement. If you increase tax, it will increase cost of goods and services and it is the consumers that will suffer for it. You don’t make people poorer by adding to their burden. So government must be very careful when it says it want to generate more revenue internally. Rather than increase the tax, I think what government should do is to widen the tax gap between the rich and the poor or average Nigerian. Some companies and well to do individuals are not paying tax. Government should also focus on luxury goods, especially foreign goods that we can do away with. Government should not tax those goods that have direct effect on the common man.
Debt burden on the increase
Figures released by the Debt Management Office (DMO) showed that the Federal Government’s domestic debt profile rose to N15.814 trillion in September 2018 from N15.629 trillion in June 2018. That is 1.19 per cent increase. This figure becomes more worrisome when we look at the total public debt stock, comprising external and domestic debts of the Federal Government, the 36 states and the FCT hitting $73.208 billion (N22.38 trillion) recorded in June 2018. This trend, which is very disturbing, could have a negative effect on the developmental capacity of Nigeria, despite government’s financial managers’ argument that the rate of increase is within a manageable limit. Financial experts at the International Monetary Fund (IMF) and the World Bank have, in fact, advised that the revenue-to-debt ratio is unsustainable and it portends a serious danger for the future generation.
How OPS is faring with economic situation
We have to start by commending the government in doing everything possible to make businesses thrive. Specifically, we commend the office of the Vice President for the efforts at ensuring that we have a favourable economic environment to operate. Having said all these, there are instances where some agencies of government have not keyed into the good work the government is doing. Some of them are not in line with the vision of the government in ensuring that there is ease of doing business. But the good news is that while the leadership of those agencies are mounting their onslaught on businesses through regulating of business outside the rule of law (because we are not against regulation), the government has been very responsive in calling them to order anytime we raise an issue with them, which is also commendable. In time past, we complained, raised issues, but nobody listened to us. So, we commend the present government for listening to us when there are issues raised. When you have an avenue or window to complain about the situation of things, I think it’s a wonderful thing.
Economic policies and job creation
We think that government should look at the policies that have to do with the banking sector. Banks are not playing their role in ensuring that small businesses thrive. Banks will rather lending money to government or big businesses where they know the returns will be big. I think government needs to look into this.
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