The Lagos Chamber of Commerce and Industry has faulted the renewed tax drive in the Nigerian economy, saying that it was focused more on investors than consumers. The chamber stated this in a document setting economic diversification agenda for the Federal Government on Sunday.
In the document signed by the Director General, LCCI, Mr MudaYusuf, the chamber stated, “The Federal Inland Revenue Service has scant regard for due process in its drive for revenue. It is, therefore, inherently a disincentive to investment and economic diversification.
“The three tiers of government target investors more than consumers. This is not in consonance with best practice principles in taxation.” In an economy which is almost 50 per cent informal, the taxation structure is not investment-friendly, the chamber maintained, recommending that the tax structure should be reversed to aid economic diversification.
Yusuf faulted the use of banks as collection agents for the FIRS, noting that it was very disruptive, distracting, arbitrary, oppressive and unfair to investors. The LCCI insisted that such practice was a serious disincentive to investment and the promotion of financial inclusion.
“This approach should be discontinued. Taxation should not be seen only as an instrument of revenue generation; it is also a potent instrument for stimulation of investment,” he said. The chamber stressed that for there to be a sustainable economic diversification, the government needed to get the policies, institutions and infrastructure right and ensure they were properly aligned.
It added that the policy mix must be right for the desired outcomes to be achieved. He advised the Central Bank of Nigeria to moderate its monetary tightening stance adding that this would moderate interest rate and also drive domestic investment.
He said, “It is difficult to drive domestic investment at current levels of interest rate which is well over 25 per cent for most economic players. The economy needs investment, especially domestic direct investment to drive diversification.”
He advised against a foreign exchange regime that ‘perpetuates a rent economy’, saying that it created opportunities for arbitrage, corruption, resource misallocation, impeded the inflow of investment, and created transparency issues in the allocation of forex. “The current multiplicity of rates is inimical to sustainable economic diversification,” he pointed out.
The chamber advised that trade policies that determine exports and imports should be guided by sectoral competitive and comparative advantage. “Institutional capacity to enforce the policies should also be considered in trade policy formulation. The Nigeria Customs Service needs to demonstrate better sensitivity to the plight of investors.
“One of the biggest headaches of the business community is the Nigeria Customs Service. Policies should be focused on incentivising resource-based industries which typically have a competitive advantage and good impact on the economy because of the high multiplier effect. The relativity of tariffs between Nigeria and the neighbouring countries should also be considered in the formulation of trade policy.”
Yusuf advised that procurement policy should be structured to favour sectors that had the potential to be diversification champions as well as leading backward integration firms. He advised government agencies to facilitate investment growth rather than see themselves as revenue generating organs.