The Association of Bureaux De Change Operators of Nigeria (ABCON) has cautioned against the proposed increase in the Value Added Tax (VAT) to 7.5 per cent, from five per cent.
According to the currency dealers, the proposal would lead to more unemployment and poverty in the country.
The association also called for a downward review of the cash processing fees introduced by the Central Bank of Nigeria under the cashless policy.
The Association made this call in the ABCON Quarterly Economic Review for third quarter of the year (Q3’19).
Commenting on the proposed VAT hike, it stated: “The immediate implication is that every Nigerian will either directly or indirectly be affected by the whopping 50 per cent increase in VAT.
“The average VAT collection in the past six years is about N900 billion. The revenue is shared 15 per cent to the federal government, 50 per cent to states and 35 per cent to local governments net of four per cent cost of collection to FIRS.
“But beyond the revenue increase of about 50 percent, there will be other attendant consequences like higher inflation rate, interest rate hike, more unemployment and people will generally become poorer.
“It will increase the burden on the poor and SMEs contrary to the 2017 National Tax Policy. We also believe that seeking to expand the VAT net while also increasing the VAT rate at the same time is a conflicting strategy,” it argued.
ABCON was however of the opinion that the system could generate twice as much from VAT at the current rate by expanding the scope of threshold and ensuring a robust administration rather than by increasing rate.
It added: “A review of VAT waivers, better policing of the border to improve import VAT collection, the framework for VAT on imported services and digital economy.”
Commenting further on the cashless policy, it pointed out that even though the objective of the policy was laudable, the cash processing fees would have severe impact on small businesses across the country.
On the other hand, the Association expressed concern over the rising level of the nation’s public debt, calling on the federal government to express caution and reduction in the public debt.
In its review of the BDC subsector in Q3’19, the Association called on BDC operators to develop strategies for attracting autonomous foreign exchange as well as for boosting inter-BDC trade so as to reduce dependence on CBN intervention.
“As business confidence increases within the BDC sub-sector, traders should improve on strategies to attract autonomous foreign exchange sources as against rigid concentration of CBN intervention funds.
“With volumetric increase in foreign exchange liquidity within the sub-sector, INTER-BDC trade will be promoted resulting into dynamic exchange rate regimes derivatives. Thus, the framework and structure must be developed by the regulatory bodies and ABCON through adequate policies and supervision,” it stated.