The Bola Tinubu administration is considering another increase in the value-added tax rate in Nigeria but maintains it has a secret sauce to keep prices of goods at the same rate across the country.
The chairman of the presidential committee on fiscal policy and tax reforms, Taiwo Oyedele, disclosed this on Monday at a policy exposure and impact assessment seminar organised by the committee, where he announced that the VAT revenue-sharing formula would be reviewed.
Mr Oyedele’s statement comes nearly a year after he warned Nigerians that the administration would make life impossible for people not captured in the country’s draconian tax brackets.
Critics at the time said Mr Oyedele’s push to expand tax receipts for the government failed to consider the poor economic conditions of Nigerians. Youth unemployment still lingers above 50 per cent in the country.
Prices of goods and services rose sharply when Nigeria last increased VAT from five per cent to 7.5 per cent, effective February 1, 2020.
Mr Oloyede said, “We are proposing that the federal government’s portion should be reduced from 15 per cent to 10 per cent. States’ portion will be increased, but they would share 90 per cent with local governments.”
“In 1986, we had sales tax collected by states. The military came up with VAT in 1993 and stopped sales tax, so they said it would collect VAT and return 15 per cent as the cost of collection, and that is the 15 per cent charged today came about. But we think it is too much.”
The former PwC tax chief noted that Nigeria’s economy “is more than 50 per cent in services, and if I just stop at this, many states will be broke because VAT collection will go down by more than 50 per cent, and it won’t even fly.”
Mr Oyedele then announced, “So we, therefore, need to adjust the VAT rate upward. We would ensure that it doesn’t affect businesses. The only thing is to look at basic consumption from food, education, medical services, and accommodation will carry zero per cent VAT. So for the poor and small businesses, no VAT.”
He added, “We have spoken to businesses about it, and they won’t increase the product price. We want to make sure when we do VAT reform, no one will increase the price of commodities. We will work the mathematics with the private sector.”
Mr Tinubu’s government has already announced a rash of charges, including the reintroduction of cash deposit processing fee many described as ill-timed and punitive. NLC and opposition party PRP described the levies as extortionate and heartless.
Meanwhile, helicopter operators are up in arms about the $300 landing levy imposed on them by the government through its concessionaire, NAEBI Dynamic Concepts Limited.
