By Milcah Tanimu
In a move towards fiscal policy and tax reform, the presidential committee has advocated for an increase in the value-added tax (VAT) rate. The committee, led by Chairman Taiwo Oyedele, made this disclosure during a policy exposure and impact assessment session.
Oyedele revealed that the committee is also proposing a review of the VAT revenue-sharing formula. Presently, states and local governments receive 50 percent and 35 percent of VAT revenue, respectively, with the federal government allocated 15 percent.
Under the proposed adjustments, the committee recommends increasing states’ and local governments’ share to 90 percent, with the federal government’s portion reduced to 10 percent. This shift aims to empower the lower tiers of government, aligning with the origins of VAT as a tax generated primarily at the state level.
Oyedele noted that while VAT is crucial for government revenue, its burden should fall primarily on the ultimate consumer. To maintain transparency and neutrality, essential items such as food, education, medical services, and accommodation would be exempt from VAT.
Acknowledging concerns about potential price increases, Oyedele assured that businesses have been consulted, and measures would be taken to prevent inflationary pressures. The goal is to implement VAT reforms without causing hardship for consumers or businesses.
Additionally, Oyedele emphasized the importance of centralizing VAT collections to prevent administrative chaos. Granting each state exclusive control over collections could disrupt the tax system’s efficiency and effectiveness.