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 accusations that his committee is recommending a rate increase, Oyedele stated that his committee has proposed a “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 service 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 working capital of businesses. Introduce VAT fiscalisation 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 added the committee’s proposals seek the achieve 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 disclosed that proposals involving reduction in companies income tax rate, and increase exemption threshold for personal income tax were also discussed. Nigeria’s VAT rate is currently 7.5 per cent.
Highlighting some of the challenges with the tax system, Oyedele said, “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 which constitute basic consumptions (food, education, and healthcare) are liable to VAT rather than being exempt or zero-rated.”