In a recent policy exposure and impact assessment seminar organised by the Presidential Committee on Fiscal Policy and Tax Reforms, Chairman Taiwo Oyedele highlighted the necessity of adjusting Nigeria’s Value-Added Tax (VAT) rate.
Oyedele emphasised the need for a review of the VAT revenue-sharing formula during the seminar held on Monday.
The committee’s proposal entails a significant overhaul of the current VAT distribution mechanism. Specifically, Oyedele suggested a reduction in the federal government’s share from 15 percent to 10 percent, with states and local governments collectively receiving 90 percent.
Currently, under Section 40 of the VAT Act, the federal government receives 15 percent, while states and local governments share 50 percent and 35 percent, respectively.
Oyedele justified the proposed changes by referencing the historical context of VAT implementation in Nigeria. He explained that while VAT was introduced in 1993, replacing the previous sales tax system, the current distribution model disproportionately favours the federal government.
The committee aims to rectify this imbalance by making the distribution more transparent and equitable, in line with international standards.
Furthermore, Oyedele addressed concerns regarding the potential impact of VAT adjustments on businesses and consumers.
He assured that essential goods and services such as food, education, medical services, and accommodation would remain exempt from VAT, mitigating the burden on low-income individuals and small enterprises.
Crucially, Oyedele emphasised the committee’s commitment to ensuring that VAT reforms do not result in price hikes for consumers.
He stated that discussions with businesses have indicated their willingness to absorb any additional costs associated with the proposed changes. The committee intends to collaborate closely with the private sector to implement VAT reforms in a manner that safeguards both economic stability and consumer welfare.
Overall, the proposed VAT rate increase and revenue-sharing revision signify a strategic effort by the Presidential Committee on Fiscal Policy and Tax Reforms to optimise revenue generation while promoting fairness and inclusivity within Nigeria’s tax system.
