According to the presidential committee on fiscal policy and tax changes, raising the value-added tax (VAT) rate is necessary.
The VAT revenue-sharing formula would be revisited, according to committee chairman Taiwo Oyedele, who made this announcement during the policy exposure and impact assessment session that the committee held.
Oyedele continued, saying that the committee had suggested raising the portion of VAT money that goes to state and local governments from the current 85 percent to 90 percent.
Section 40 of the VAT Act specifies that the states receive fifty percent of the tax revenue, local governments receive thirty-five percent, and the federal government receives fifteen percent.
He claims that the committee is suggesting that the federal government’s part be decreased from 15 percent to 10 percent as a result of the new sharing structure that is being suggested.
“We are suggesting that the share from the federal government be lowered to 10% from 15%. States would receive a larger part, but they will still divide 90% with local governments, he stated.
He clarified that because the VAT is a state-level tax, the new distribution system benefits the lower tier of government.
States were responsible for collecting sales tax in 1986. When the military implemented the Value Added Tax (VAT) in 1993, they eliminated sales tax and declared that they would collect VAT and repay 15% of the total as collection costs. This is how the current 15% levy came to be. However, we believe that to be excessive,” he stated.
The tax expert went on to say that the final consumer should bear the brunt of VAT.
According to Oyedele, “we have to make it transparent and neutral, and this is what over 100 countries with VAT are doing.”
“Nigeria’s economy is more than 50 percent in services, and if I just stop at this, VAT collection will go down by a lot, which will leave many states broke,” he said.
Therefore, the VAT rate needs to be raised. We would see to it that businesses are unaffected. The only thing to consider is that basic expenses such as food, lodging, medical care, and education will all be VAT-free. Thus, no VAT for small firms and the impoverished.
Other customers will pay a little bit extra, according to Oyedele.
Businesses that we have spoken to about it have agreed not to raise the price of their products. We want to ensure that no one raises the price of goods when we implement the VAT reform. He said, “We will work the maths with the private sector.
Additionally, Oyedele stated that giving each state sole custody of its collections would probably lead to anarchy.
