The Chairman of the Presidential Tax and Fiscal Policy Reforms Committee, Taiwo Oyedele, has announced that the proposed increase in Value Added Tax (VAT) from 7.5% to 10% will be implemented in phases. This decision aims to avoid a significant decline in government revenue and mitigate the sudden surge in prices of goods and services.
Oyedele revealed that empirical data shows less than 10% of affluent Nigerians fulfill their tax obligations, and the committee aims to increase compliance rates from 30% to over 90%. The VAT revenue-sharing formula has been reviewed, increasing state collection rates from 50% to 55%, local government areas from 35% to 35%, and reducing the federal government’s rate from 15% to 10%.
The committee recommends phasing in the reforms, reducing Company Income Tax from 30% to 25% by 2026, and implementing VAT increases in 2025 and 2026. The goal is to avoid sudden impacts on government revenue and prices. Oyedele emphasized the need for proper planning and phasing in the reforms.
The proposed changes also include harmonizing taxes and levies, such as income tax, property tax, and excise tax, to simplify the tax system and reduce compliance costs. The committee recommends removing VAT on essential items like food, education, and medical services to reduce the cost of living and inflation.
The government aims to increase revenue by broadening the tax base and improving compliance, rather than relying on rate increases. The committee’s recommendations also include making tax payment a condition for elective office and government appointments.
The proposed reforms aim to create a more efficient and equitable tax system, reducing the burden on low-income individuals and promoting economic growth. The committee’s recommendations will be presented to the National Assembly for approval and implementation.
