Nigeria tax system undermines economic growth, says Oshinowo 

Former Director General of NECA, Segun Oshinowo, in this interview with COLLINS OLAYINKA, argues that multiplicity of taxes being mulled by government would hamper the growth of the country.

Nigeria is operating what I call a ‘silo economy’. Presently, Nigeria is having a revenue problem, but rather than look for solutions to this revenue problem, which will not impact on growth, Nigeria is simply focusing on taxation as the possible solution to boosting its revenue not knowing that it would be shooting itself on the foot in the long run and kill growth. Government must be conscious of this. A typical approach of solving the budget debt challenge shouldn‘t focus on taxation alone, government must look at its expenditure and other areas and opportunities.

First, I want to ask, for instance, what will become of our refineries when Dangote refinery comes on stream and NNPC is telling us every year that they want to revive the refineries but nothing is being done. They are encouraging wasteful spending and I wonder why at this time.

When you say you are looking at those who are productive in the economy to help you enhance growth as a means of resolving your economy, you may end up in doom.

Government should look at this issue of taxation from an holistic angle. They are looking at it from a pseudo perspective and it is painful. Look at what the Customs Service has indulged itself in, in the last few weeks; raiding car owners due to payment of Custom duties. What stops Customs from inviting the managing directors of these car marts for dialogue to find out what happened and how they can resolve the problem associated with car importation? Will that line of action not be productive for the economy than this rule of the thump?

It is only a dull economist that will recommend increase in tax at a time when the income of the people has lost value. What increase in VAT would translate to is increase in prices. The level of income has not even significantly increased in the last four to five years. In fact, real value of our income has decreased. So, what sense is in increasing prices of goods at a time purchasing power had declined. That could lead to reduction in demand, production and even retrenchment of workers by companies and when companies sack workers, it would lead to increase in unemployment. This is just simple economics 101.

For any increase in tax, consumers would bear the brunt because you are attacking the purchasing power of the consumer from multi-dimension. As we all know, consumer expenditure is key to GDP growth. So, government is trying to hamper the growth of the country.

What should government do to shore up the nation’s revenue?
The point is that government is very good at conceptualisation of policies, but very poor at performance. For instance, in the Economic Growth Recovery Plan (EGRP), government said it would sell wasteful assets or unproductive enterprise. But we are three years down the line, why is government yet to do something about that? If they have done that, it would have boosted revenue.

Also, on the cost side, government should institute what I call ‘waste and cost control measure’. Even at individual level, what is done when someone is in deficit situation is that he looks at his expenditure to see how he can reduce spending. Government would have boosted revenue through the sale of waste assets and unproductive enterprise that can be better run by the private sector and also reduce it spending patterns.

Government’s thought of increasing tax to boost revenue is going to backfire on the economy because they are going to kill consumer expenditure and kill the productive capacity of manufacturing. We are just coming out of recession and I am not even sure we are going to meet our growth projection for this year. So, government’s economic action should actually tilt towards how we can boost consumer expenditure rather than reducing consumer expenditure.