Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, has said that his committee will propose the elimination of value-added tax on certain fundamental food, educational, and healthcare products.
Oyedele stated this on Wednesday via his X handle (previously Twitter), clarifying comments made earlier at a policy exposure and impact assessment session sponsored by the committee.
Denying rumours that his committee is suggesting a rate hike, Oyedele stated that his group has instead recommended, “Full input VAT credit for businesses to reduce their cost of doing business and minimise the strain on their cash flows.
“Remove VAT on an expanded list of basic food, educational, and healthcare items to protect the poor. Harmonise all consumption taxes into one (VAT only) and adjust the revenue-sharing formula in favour of states to address a multiplicity of taxes.
“Removal of VAT on the export of services and intellectual property to promote non-oil exports, increase the threshold for VAT exemption for small businesses, and enhance the VAT refund process to reduce the strain on the working capital of businesses.
“Introduce VAT fiscalization and electronic invoicing to curb evasion, which makes honest businesses uncompetitive, and consequential upward adjustment to the VAT rate on items not exempted to avoid a significant drop in revenue.”
He noted that the committee’s ideas aim to fulfil the goal of streamlining the tax system, thus “making it easier for businesses to comply and for the government to administer. By consolidating these taxes into a single, more efficient VAT system, we can reduce administrative costs and increase overall tax compliance.”
Oyedele revealed that plans to reduce corporate income tax rates and enhance the personal income charges exemption threshold were also explored. Nigeria’s VAT rate is currently 7.5%.
Highlighting some of the difficulties with the system, Oyedele stated, “Nigeria’s VAT system places a huge burden on businesses as they are not allowed to claim the input VAT incurred on services and assets. Some items that constitute basic consumption (food, education, and healthcare) are liable to VAT rather than being exempt or zero-rated.”
He stated that small firms must deal with VAT compliance due to the current low VAT exemption threshold for small businesses and that many states levy various forms of consumption taxes in addition to VAT, resulting in a multiplicity of charges.
