The Presidential Fiscal Policy and Tax Reforms Committee on Tuesday announced plans to forward a legislative proposal to the National Assembly for the purposes of increasing the Value Added Tax (VAT) rate from the current 7.5% to 10%.
The Chairman of the committee, Mr. Taiwo Oyedele, who gave the hint when he featured in Channels Television’s programme ‘Politics Today’ said that the committee was also working to address the challenge of multiple taxes in the country as part of its mandate to streamline the tax system and ultimately reduce the tax burden on citizens and businesses.
According to the tax expert, the draft of the proposed tax law will be submitted to the National Assembly soon.
He clarified: “The law we are proposing to the National Assembly includes an increase in the VAT rate from 7.5 percent to 10 percent, starting from 2025. However, we are uncertain about how quickly the law will be passed. The proposal also outlines subsequent increases and the specific years they will take effect.”
Oyedele elaborated on challenges facing the Nigeria’s tax revenue system, especially the inability of the fiscal authorities to generate adequate revenue for governance.
He lamented: “We are facing major issues in our revenue system, both tax and non-tax. The entire fiscal system is in a state of crisis.
“The first mandate is to examine governance, including the country’s finances, borrowing practices, and coordination within the federal government and across sub-national entities. The second mandate focuses on revenue transformation.
“The country’s revenue profile is abysmally low; even if we dedicated our entire revenue to infrastructure, such as road construction, it would still be insufficient. The third mandate involves the management of government assets”, the committee chairman added.
Oyedele also pointed out that the proposed tax reforms would lead to a corresponding reduction in the personal income tax rate, adding that that if the proposed law is passed, individuals earning N1.5 million per month or less would see a reduction in their personal income tax.
This is even as explained that corporate income tax rates were expected to decrease from 30% to 25% within the next two years.
Noting that currently Nigeria is having multiple taxes, including an IT levy and an education tax, Oyedele maintained that the committee is streamlining all the taxes into a single tax.
He clarified that initially, the consolidated tax would be set at 4%, and it will decrease to 2% over the next few years.
Fiscal experts believe that the committee’s proposals, if coherently implemented, could bring significant changes to Nigeria’s tax landscape, with positive implications for individuals and businesses nationwide.
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