Taiwo Oyedele-led Presidential Committee on Fiscal Policy and Tax Reforms has recommended an upward review of the Value Added Tax (VAT) while suggesting that the VAT revenue-sharing formula be reviewed.
Oyedele, while stating this at a policy exposure and impact assessment session organised by the committee, allayed fears over the impending review, adding that the new review would not affect the poor and small business owners.
The federal government had increased VAT from five per cent to 7.5 % in February 2020, following the passage of the 2020 Finance Act.
The Tax Committee Chairman, however, assured that businesses would not increase their products due to the increase.
He said, “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.
“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, which will carry zero per cent VAT. So, for the poor and small businesses, no VAT.
“We have spoken to businesses about it, and they won’t increase the product price. We want to make sure that when we do VAT reform, no one will increase the price of commodities. We will work on mathematics with the private sector.”
The committee, Oyedele added, has also proposed a review of the state and local governments’ share of VAT revenue to 90 per cent as well as reducing the federal government’s share from 15 per cent to 10 per cent.
Section 40 of the VAT Act provides that the federal government gets 15 per cent, states share 50 per cent, and local governments share the balance of 35 per cent.