TAX BREAKS, PRIVATE SECTOR INVESTMENT WILL BOOST HDI — ECONOMY ANALYSTS
Amidst the challenges of trans-lating Nigeria’s population into real economic assets, economy experts at the just concluded third edition of annual Vanguard Economic Discourse have recommended use of tax incentives for private sector investment as a means of enhancing the quality of human life, otherwise known as Human Development Index, HDI.
However, they expressed divergent views on the nature of correlation between economic growth and HDI. Muda Yusuf, Director General, Lagos Chamber of Commerce and Industries, LCCI, at the Discourse with the theme, “Human Development Index vs Economic Growth: Nigeria’s Policy Options”, leading the proposition for tax and tariff incentives explained that investments cannot happen in the socio-economic sectors such as education and healthcare without such incentives from government. He also said the public sector cannot deliver the required services to enable development of the sector which he believes is the bedrock of HDI performance.
Yusuf stated: “The resources of the states are dwindling by the day and making it difficult for the government to discharge some of its fundamental obligations in the social space namely, issue of education, health and even security. It is very important that we also deal with the issue of resources. The government today does not have the resources to take proper care of social investment. We have to deal with this in two ways. “Already the private sector is playing a lot of role in this space, but what kind of support can we give them? That is important.
You have a situation where the educational system or the educational structure is now being private sector driven. There is the risk of exclusion, because the private sector is profit driven, we are dealing with cost recovery and in the process, many of the pupils in the rural areas will be excluded. This will create a further social problem. From the policy perspective, all investors in education should enjoy tax-free investment.
“You should not be taxing a private school, either primary, secondary or university the way you are taxing a bank or an oil company, because they are helping to support the government to deliver on some key social objective. We should grant them complete tax holiday and all the input into the educational sector, either education material, laboratory materials all these should come into the country free of import duty. This will enable the private sector complement the effort of the government in delivering quality human capital because we need human capital to drive the economy. “Secondly, in the area of health, most of the public hospitals today are in a very sorry state, and that has happened because of poverty resources.
Forget about whether resources are mismanaged, or not enough, the reality is that when you go to any hospital, you discover they do not have resources. The private sector is also filing a lot of gap in that space, therefore all the medical equipment, drugs both those in running pharmaceutical, those who are running private hospital should also enjoy complete tax free investment so that they can complement the effort of government in the delivery of health care. “You should not be taxing a private hospital the way you are taxing an oil company, because they play a special role, they are complementing the efforts of the government. Recently, there was a review of tariffs whereby the tariff on medical equipment was moved from 10 per cent to 70 per cent, only God knows who went to put that in the tariff book. We are talking about X-ray equipment, radioactive equipment and others.
Radioactive equipment “We are talking of a situation where the poor do not have access to good health, and yet the tariff on medical equipment which we do not produce locally was moved to 70 per cent. In same vein, the cost of syringe used in hospitals was also moved from 10 per cent to 70 per cent import duty. However, there are claims that there are some people that produce syringe locally.
We need to deal with the issues of tax and import duty to support the private sector’s contribution to social investment, in other to grow the capacity of this economy. “Because this economy needs funds to grow, we need to grow investment because it is from investment that we can grow revenue, it is with revenue that you can develop education, health services, support security forces.
Investment is key, so all our policy, equipment that can support micro-enterprises, indigenous investors, FDI, everything should be put on the table because if you do not grow investment space, there is no way you can grow the revenue and there is no way you can increase employment. “If you train people, they go to schools, they need jobs and someone has to provide the job.” On the issue of correlation between economic growth and HDI, Yusuf stated: “I have a bit of problem in terms of recognising whether it is important to build a strong economy so that we can deliver a very good social investment or whether we should face social investment and make the economy the secondary.
I think it is a bit of a dilemma for me. If you look at all the leading economies today, there is a correlation between the size of their economy and the welfare of their citizens. The correlation may not be 100 per cent, but clearly, there is a correlation.”