The nation’s foreign currency dealers have joined the argument against the processing fees for cash-less policy operations and the government’s planned hike in Value Added Tax rate.
While the Central Bank of Nigeria (CBN) reintroduced the suspended cash-less policy, with various percentage charges for withdrawals and deposits above-set limits for individuals and corporate entities, the Federal Government has insisted on going ahead with 7.2 per cent VAT rate, against five per cent previously.
But the Association of Bureaux De Change Operators (ABCON) has called for a downward review of the cash processing fees introduced by the apex bank under the cash-less policy.
ABCON made the call during its third Quarterly Economic Review for 2019, stressing that though the objective of the policy is laudable, the cash processing fees will have a severe impact on small businesses across the country.
“The policy stipulates three per cent processing fees for withdrawals and two per cent processing fees for lodgments of amounts above N500,000 for individual accounts, while corporate accounts would attract five per cent processing fees for withdrawals and three per cent processing fees for lodgments of amounts above N3million.
“While the objectives of the policy are developmental in nature, a major observation is the consequent effect on small and medium scale business circles in Nigeria, where business confidence is still largely low and fragile.
“Because of this, a good volume of businesses is still largely in cash, especially in rural areas. Thus due to the likely negative effects in this critical segment of the economy, we have recommended lower processing fees of between 0.5 per cent to 0.75 per cent and one per cent to 1.25 per cent for individual and business account holders respectively.
“The impact on the general economic performance and compliance to the cashless policy would be observed and analyzed for further amendments,” the President of the ABCON, Dr. Aminu Gwadabe, said.
ABCON also cautioned against the proposed increase in VAT, insisting that the increase will lead to more unemployment and poverty in the country.
The association also faulted the move to expand the VAT net while also increasing VAT rate at the same time, as a conflicting strategy.
Similarly, it also expressed concern over the rising level of the nation’s public debt, calling on the federal government to be cautious and reduce the stick of obligations.
“The immediate implication is that every Nigerian will either directly or indirectly be affected by the whopping 50 per cent increase in VAT.
“The average VAT collection in the past six years is about N900 billion. The revenue is shared 15 per cent to the Federal Government, 50 per cent to states and 35 per cent to councils, net of four per cent cost of collection to FIRS.
“But beyond the revenue increase of about 50 per cent, there will be other attendant consequences like higher inflation rate, interest rate hike, more unemployment and people will generally become poorer.
“It will increase the burden on the poor and SMEs contrary to the 2017 National Tax Policy. We also believe that seeking to expand the VAT net, while also increasing the VAT rate at the same time is a conflicting strategy.
“Instead, ABCON review is of the opinion that the system can generate twice as much from VAT at the current rate by expanding the scope of threshold and ensuring a robust administration rather than by increasing rate.
“A review of VAT waivers, better policing of the border to improve import VAT collection, a framework for VAT on imported services and digital economy,” he said.