Ex-National Planning Commission (NPC) minister and chief economic adviser to former President of Nigeria, Chief Olusegun Obasanjo, Professor Ode Ojewu recently advised the nation’s economic managers to employ a bit of caution on sensitive economic matters such as the new indirect tax administration in the country from next year and the management of inflation.

Ojewu spoke to journalists in Abuja at the end of the sensitization campaign by the technical committee on the National Tax Policy.

The National Tax Policy committee is proposing among other things that emphases be shifted from direct taxation to indirect tax, which involves taxing several aspects of consumption, which is embedded in the Value Added Tax (VAT).

Already, there is a proposal that the VAT, which is at the moment at five per cent be raised to 15 per cent from 2009, but that would become effective if stakeholders across the country give vent to the proposal including the National Assembly.

Though the former minister admitted that indirect taxation was the easiest form of tax to manage, because it was difficult to evade, he prescribed what he referred to as ‘discriminatory’ indirect taxation so that the poor in the country would not be negatively hampered by its introduction.

According to him, government can achieve the discriminatory taxation by exempting taxes or levies on basic food stuff, clothing and medicals which are basic to all and sundry and allow the tax on only exotic goods and services.

He added, "Indirect taxation is easier to administer, because it is very difficult to evade, but it is wrong if it leads to blanket increases in taxes. If it is discriminatory, then it is good because it gives you the opportunity to get all tax evaders".

He continued, "Things like food, education, basic clothing and health should be avoided. The shift to indirect tax should be such that those that are rich and are evading taxes should be made to pay.

"For instance, if you are a rich man and you go to eat in Transcorp Hilton Hotel, you should pay the tax there or if you import very expensive car you should be able to pay proportionate to the bigness of the car, while the poor man that buys a small car should pay little charges for the small car. It should not be blanket," he further enjoined.

On inflation management, Ojewu also advised that the managers of the economy should be afraid of inflation to the extent that the strategy leads to poverty and further inflation, contending that spending was one potent way of checking inflation.

His words were: "If we have been spending properly, not by means of officials siphoning funds, it would have stopped inflation. For instance, if you spend on infrastructure like roads which helps in the transportation of food stuff from the rural areas to the cities, the cost of transporting the goods will fall and will translate to the food prices or spending in agricultural production to increase output, it will certainly lead to drop in prices."

In the past two quarters, the Central Bank of Nigeria (CBN) has been battling with inflation, which it recently put at 12 per cent. It has been controlling inflation by raising the Monetary Policy Rate, the rate at which it lends money to commercial banks for no-lending, which has increased the cost of funds in the country.