The presidential committee on fiscal policy and tax reforms has said it is working on reviewing Nigeria’s value added tax (VAT) rate to protect the vulnerable as well as small businesses.
Taiwo Oyedele, the chairman of the committee clarifying comments earlier made on the federal government increasing VAT rate said he was “quoted out of context”.
Oyedele who made the clarification via his official X (formerly Twitter) handle on Wednesday highlighted some of the reforms his committee had come up with.
The tax expert noted that with the current system, basic consumptions which should be exempted from tax are liable, adding that many small businesses have to contend with VAT payment.
“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,” Oyedele said.
The chairman stated that many states charge other forms of consumption taxes in addition to VAT, creating multiplicity of taxes while export of services and intellectual property which should be zero-rated bear VAT hindering exports.
He however noted that with the reforms proposed to the private sector, the committee aims to achieve “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 multiplicity of taxes; remove VAT on export of service and intellectual property to promote non oil exports; increase the threshold for VAT exemption for small businesses,” Oyedele said.
He added that the proposal will enhance the VAT refund process to reduce the strain on working capital of businesses.
The tax expert said the committee plans to introduce VAT fiscalisation and electronic invoicing to curb evasion which makes honest businesses uncompetitive, adding that it will adjust the VAT rate on items not exempted to avoid a significant drop in revenue.
Nigeria’s VAT rate was increased in February 2020 from 5 percent to 7.5 percent which it currently stood at.
