The Nigeria’s Presidential Committee on Fiscal Policy and Tax Reforms has produced its preliminary suggestions. Below are the key highlights of the Committee’s proposal.
President Bola Tinubu has given his approval for the establishment of a Presidential Committee on Fiscal Policy and Tax Reforms. The committee will be led by Mr. Taiwo Oyedele, who holds the position of Fiscal Policy Partner and Africa Tax Leader at PriceWaterhouseCoopers (PwC).
The announcement of the committee was made by Dele Alake, the Special Adviser to the President on Special Duties, Communications, and Strategy, in a statement released on Friday.
Issues Identified
No Input VAT Credit: Businesses cannot claim input VAT on services and assets, increasing operational costs and cash flow issues.
Tekedia Mini-MBA edition 15 (Sept 9 – Dec 7, 2024) has started registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
VAT on Basic Needs: Essentials such as food, education, and healthcare are not exempt or zero-rated, burdening the lower-income segments of the population.
VAT Compliance for Small Businesses: The low VAT exemption threshold places a compliance burden on many small businesses.
Multiplicity of Taxes: The presence of other consumption taxes in addition to VAT at the state level complicates the tax landscape.
VAT on Exports: Exported services and intellectual property are taxed, which can hinder the competitiveness of Nigerian exports in the global market.
Proposed Reforms
Full Input VAT Credit: Allowing businesses to claim input VAT would help reduce operational costs and improve cash flows.
Exemption of Essentials from VAT: Removing VAT from basic food items, education, and healthcare aims to protect economically vulnerable populations.
Harmonization of Consumption Taxes: Consolidating all consumption taxes into a single VAT could simplify the tax system and potentially resolve issues related to tax multiplicity.
Exemption of VAT on Exports: Making exports of services and intellectual property zero-rated could enhance the competitiveness of Nigerian exports.
Increased VAT Exemption Threshold for Small Businesses: Raising the threshold would reduce the burden of VAT compliance on small businesses.
Enhanced VAT Refund Process: Streamlining the refund process would alleviate working capital constraints for businesses.
Introduction of VAT Fiscalisation and E-Invoicing: These measures aim to combat tax evasion and make the system more equitable for honest businesses.
Adjustment of VAT Rate: A selective increase in the VAT rate for non-exempt items is proposed to counterbalance potential revenue losses from other reforms.
They also plan to seek tax exemption for 95% of informal sector businesses.
“So, we think that 95% of the informal sector should be legally exempted from all taxes; withholding tax, company income tax, even payee on their staff.
“We’re using data to inform our decisions. Currently, if you earn N25 million a year or less, you don’t have to pay company income tax, you don’t have to worry about VAT.
‘’We think that the informal sector are people who are trying to earn a legitimate living, we should allow them to be and support them to grow to a point where they can then have the ability to pay taxes,” he said.
---
Register for Tekedia Mini-MBA (Sept 9 – Dec 7, 2024), and join Prof Ndubuisi Ekekwe and our global faculty; click here.