Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, has unveiled a new proposal aiming to overhaul Nigeria’s VAT system with a focus on easing the financial burden on everyday essentials. Contrary to some recent reports, Oyedele’s plan does not involve a broad VAT increase but rather a strategic adjustment designed to protect essential expenditures for ordinary citizens.
The committee’s proposal recommends reducing the VAT rate to zero percent for critical areas such as food, health, and education, as well as exempting rent, transportation, and small businesses. According to Oyedele, this approach is grounded in data showing that these categories constitute the bulk of average household spending. By eliminating VAT on these essential items, the reform aims to significantly lower the VAT burden on the majority of Nigerians.
To balance the budgetary impact of these reductions, the proposal suggests a gradual upward adjustment of VAT rates on other goods and services. This strategy seeks to partially offset the revenue loss while ensuring that the new system shields basic necessities from increased taxation.
Additionally, the reform plan includes provisions to benefit businesses by allowing them to receive full VAT credits for any VAT paid on assets and services, complementing the existing credits available on goods.
“The focus of our proposal is to shield the masses from VAT increases on essential goods and services while ensuring businesses can continue to benefit from VAT credits,” Oyedele stated. “This balanced approach aims to alleviate the financial strain on ordinary people while maintaining fiscal responsibility.”
The committee’s comprehensive proposal will be submitted to the National Assembly for review, marking a significant step towards simplifying Nigeria’s tax system and addressing pressing fiscal challenges.
