VAT INCREASE THREATENS 125,000 JOBS, FOOD SECURITY

VAT Increase Threatens 125,000 Jobs, Food Security

 

NATIONAL food security and nutritional wellbeing of consumers could be negatively impacted in the coming months, following plans by the Federal Government to increase Value Added Tax (VAT) from five per cent to 10 per cent in the new fiscal year.
   The consequences of this are that prices of even basic processed food would likely go out of the reach of the common man and compromise his nutritional status. 
   The Group Managing Director, Chief Executive Officer, Flour Mills Nigeria Plc and President, Association of Food, Beverage and Tobacco Employers (AFBTE), Mr. Paul Gbededo, raised this concern in Lagos at the weekend. 
   Speaking on behalf of the association, Gbededo said food and beverage products like biscuits, confectioneries, water and carbonated drinks, which are basic food items may not be within the reach of the masses. 

  Food and beverage products, according to the president of the association, are consider to be easy source of immediate energy and are nutritiously enriched with quick source of vitamin for the teeming population and should be readily affordable.
   There is likely to be a drop in the quality of life for the average man, should the VAT hike be implemented, Gbededo said. 
   Beyond that, he said the jobs of over 125,000 direct employees and 1,800,000 indirect jobs may experience some resizing in the wake of the VAT increase. 
   He reckoned that government does not wish to create jobs in the primary sector (agriculture) and lose the jobs that have been created in the secondary sector (manufacturing), adding that the new investments and foreign direct investment in the food industry have given Nigerian economy a boost.
  The association made the point that the sector accounts for 40 per cent of the Nigerian manufacturing industry output of estimated N3.5 trillion and estimated contribution of N40 billion per annum in tax and VAT annually. 

  Gbededo said though the manufacturing sector contributed a little less than 5 per cent to GDP, the food and beverage subsector accounts for about 40 per cent of that figure. He said market capitalisation of top 10 listed companies in the food industry comes to N2.8 trillion, while the major companies in the industry are the stabilising factors in the Nigerian Stock Exchange, even during the financial crisis.
   Finance Minister and Coordinating Minster of the Economy, Dr. Ngozi Okonjo-Iweala, had dropped the hint that the government has plans to increase VAT to 10 per cent in the 2015 budget presentation.
    “A five per cent increase in VAT would yield N614 billion, most of which would go to the states and local governments,” Okonjo-Iweala said at the presentation of the 2015 budget last week.
  VAT has always been resisted because it is tax paid by the buyer of goods and services directly leading to a rise in the purchase price of goods or products.