A possible increase in the Value Added Tax (VAT) rate from the current 7.5 per cent has been recommended by the Presidential Committee on Fiscal Policy and Tax Reforms, according to a recent statement by the Committee’s Chairman, Taiwo Oyedele.
The Committee is also suggesting a review of the VAT revenue-sharing formula without causing a price hike.
Addressing concerns about the impact of the VAT adjustment, Oyedele emphasized the need to consider essential goods and services such as food, education, medical services, and accommodation, which would remain exempt from VAT to protect the poor and small businesses.
Explaining the rationale behind the proposed changes, Oyedele stated, “Nigeria’s economy heavily relies on services, and simply maintaining the current VAT rate would severely affect state revenues. Therefore, an upward adjustment is necessary to prevent financial strain on states.”
As part of the recommendations, the Committee suggests a reduction of the federal government’s share of VAT from 15 per cent to 10 per cent, with an increase in the states’ portion, while also promoting revenue distribution to local governments.
Concurrently, there is growing discontent over the recent introduction of a 0.5 per cent cybersecurity levy on electronic transactions in Nigeria, adding to concerns about the country’s escalating tax burden.