Financial analysts have raised alarm that the government’s recent plan to increase value added tax (VAT) could lead to a reduction in purchasing power due to an effective increase in price of final goods and services.
They also said that such policy would likely reduce business sales and slow down economic growth.
An Economist , Mr John Ugwu said that the plan to review VAT upward from five per cent to 35 per cent would put the country in a tight situation.
He said although the federal government came up with the initiative in order to pay workers salary with the implementation N30,000 minimum wages, they are indirectly creating another problem for the financial system and economy in general.
He, however, said that with the announcement for the increment in minimum wage, the prices of goods in the market have started going up gradually, stressing that with full implementation and increase in VAT, the prices of goods and services will be double.
Citing an example, he said, a worker that received N100,000 every month through minimum wage will pay tax while buying books, hospital bills, school fees, food stuff. So by the end of the day, everybody may be crying, as the increment may not be reasonable enough to achieve the expected result.
A financial analyst, Mr Chidi Udenwa described the move as a wrong approach of tackling problems without caring to know the impact on the citizenry.
Udenwa stated that increasing VAT to enable government pay the N30,000 minimum wage in face of unemployment, fragile economic growth and low purchasing would be counterproductive.
