Increase in taxes raises household spending, says former NBS DG

Bisola David
Bisola David
Increase in taxes raises household spending, says former NBS DG

Chief Economist at KPMG Nigeria and former Director-General of the National Bureau of Statistics, Dr. Yemi Kale,  has expressed worries about the possible detrimental effects of increased taxation on household expenditure and the growth of private businesses.

According to Nairametrics, speaking on June 3 at the Nairametrics Q2 2023 Economic Outlook Webinar, Dr. Kale emphasized the difficulties associated with enacting greater taxes during a period of shaky economic growth.

He expressed his enthusiasm for Bola Tinubu’s administration’s plans to restructure the public sector and public finances.

“I am one of the rare individuals who opposes raising taxes in terms of public finances. I don’t belong to the group of people who support raising taxes, especially during a recession and when the economy is experiencing shaky growth,” he remarked.

He pointed out that the two main drivers of GDP in the Nigerian economic system are private investment and household consumption spending.

“When taxes are raised, household expenditures are squeezed, and business earnings are squeezed as well, which inhibits business expansion and other activities.”

Dr. Yemi Kale advised refraining from raising taxes and putting more effort into harmonizing current levies and enhancing public sector effectiveness, such as by getting rid of unnecessary spending like fuel subsidies. He emphasized that as revenue rises, revenue agencies must show fiscal prudence.

He said: “Tax hikes are not something I support. I prefer harmonizing the many taxes now in place above more effective public sector spending. Getting rid of, for instance, needless spending like fuel subsidies.”

The government was urged by the chief economist that public sector reform should consider the capacity of the public servants rather than only the normal rationalization of the public sector.

“I believe the goal should be to enlarge the revenue base and harmonize taxes using technology and a more effective spending structure.

“If we could manage the public finances in this way. I believe that once we successfully restructure the public sector, everything else will go together nicely. and will have some notable increase,” he said.

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