Private sector operators have kicked against the imposition of new taxes on businesses rather than expanding the tax net, citing concerns for increased tension in a struggling business environment.
While manufacturers are concerned about the business environment despite an uptick in production in the last quarter of 2021, the services sector is worried about the government’s plans to raise revenue through new taxes.
For instance, the President of the Lagos Chamber of Commerce and Industry (LCCI), Dr Michael Olawale-Cole advised the federal government to focus its attention on other areas to raise funds to implement the budget rather than over-burdening the private sector with additional taxes.
He said, “The federal government should look at other areas of raising funds to implement the budget and of course tax is a must for everyone, but at the same time, we should not put too much pressure on the private sector in the area of raising revenue. We are appealing that the federal government should expand the tax net as against putting pressure on the very compliant taxpayers”.
Responding to the points made earlier by the private sector at a forum organized by the LCCI, the Director-General of the Budget Office of the Federation, Ben Akabueze, on cheaper options for borrowing, said he did not hear much in terms of the alternatives for the government.
He acknowledged the concerns on the recurrent expenditure for the 2022 budget. Still, he stated that there were vital issues to highlight, including the N4.1trn earmarked for personnel costs covering five million public servants.
Akabueze stressed that N2.7 million is spent yearly per civil servant, and there was no room to reduce the cost now and even in the future, including expenses on the military and police.
He made a strong case for revenue growth to address fiscal issues, to achieve budget comprehensiveness.
On the argument that the 2022 budget did not make provision for reforms, the DG, Budget Office disagreed with the panellists, pointing out that the decision to cater for fuel subsidy till June 2022 aligned with the reforms in the oil and gas sector.
“The government supports the power sector reforms and the plans to adopt the cost-reflective tariff regime. We appreciate the private sector interventions but would like more pragmatic policy options,” Akabueze added.
In his submission, Dr Ayo Teriba, CEO of Economic Associates, cautioned the Federal Government should kindly not dismiss the suggestion by the private sector that government should explore non-interest alternative borrowing. He also advised the government not to treat the issue of non-interest debt as a mirage.
He brought into context the incident in 2020, where the debt interest cost was more than the federal government’s revenue. Teriba decried that in 2021 about N4.2trn out of 5.5trn was deployed as debt servicing cost, which he attributed to the nation’s failure in debt management.
The economist noted that Nigeria issues the most expensive type of borrowing instruments both home and abroad: junk bonds. He stressed the need for the country to improve the quality of the bonds it issues. According to him, Saudi Arabia sold $50bn worth of debt through Sukuk last year.
He said the Saudi-issued instruments were rated investment grade by Fitch Ratings, and the government is not paying a dime in interest rate.
He said profits on the instrument would be yielded to the underlying assets, a financial return that reduces risks for the kingdom. The scholar believed that it was time for Nigeria to take interest cuts from the budget to bring significant relief to the government.
The Chairman, KPMG Africa, Kunle Elebute, who moderated the session, tasked experts and economists like Dr Ayo Teriba and Mr Olufemi Awoyemi on developing a blueprint for the Minister of Finance, Budget and National Planning and DG, Budget Office on how the Federal Government could achieve a “Non-Interest Debt” environment in a pragmatic way.
Elebute said it was important not to assume that Nigeria has underlying assets that could back up a non-interest debt issuance, which requires a thorough assessment.
He called on the private sector to play its role in supporting the government and its policy objectives with feasible solutions and ideas that could move the economy forward.