Oyedele, while speaking at a policy exposure and impact assessment session organised by the committee, said that the VAT revenue-sharing formula would be reviewed.
The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, says the committee has recommended an upward review of the value-added tax (VAT) rate.
Oyedele, while speaking at a policy exposure and impact assessment session organised by the committee, said that the VAT revenue-sharing formula would be reviewed.
Nigeria’s VAT rate is currently 7.5 percent.
He noted that according to Section 40 of the VAT Act, the federal government gets 15 percent of the tax revenue, states share 50 percent, and local governments share the balance of 35 percent.
He however noted that the committee is recommending reducing the federal government’s share from 15 percent to 10 percent.
“We are proposing that the federal government’s portion should be reduced from 15 percent to 10 percent. States’ portion will be increased but they would share 90 percent with local governments,” TheCable quoted Oyedele as saying.
He said the committee proposed adjusting the sharing formula for VAT because it is from the states.
He said, “In 1986, we had sales tax collected by states. The military came up with VAT in 1993 and stopped sales tax so they said it would collect VAT and return 15 per cent as cost of collection and that is the 15 percent charged today came about. But we think it is too much.
“So we must make it transparent and neutral and this is what over 100 countries where they have VAT are doing.
“Nigeria’s economy is more than 50 percent in services and if I just stop at this, many states will be broke because VAT collection will go down by more than 50 percent and it won’t even fly.
“So we therefore need to adjust the VAT rate upward. We would ensure that it doesn’t affect businesses. The only thing is to look at basic consumption from food, education, medical services and accommodation will carry zero percent VAT. So for the poor and small businesses, no VAT.”
“We have spoken to businesses about it and they won’t increase the product price. We want to make sure when we do VAT reform, no one will increase the price of commodities. We will work the mathematics with the private sector,” he added.