The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has announced that the committee will propose the removal of Value Added Tax (VAT) on basic food, educational, and healthcare items.
This move aims to protect the poor and vulnerable segments of society.
Oyedele clarified that the committee is not proposing a VAT rate hike, but instead, has suggested several measures to streamline the tax system and reduce the burden on businesses.
These proposals include:
- Full input VAT credit for businesses to reduce costs and minimize cash flow strain.
- Expanding the list of VAT-exempt basic items.
- Harmonizing consumption taxes into a single VAT system.
- Adjusting the revenue-sharing formula in favor of states.
- Removing VAT on export of services and intellectual property.
- Increasing the threshold for VAT exemption for small businesses.
- Enhancing the VAT refund process.
- Introducing VAT fiscalisation and electronic invoicing to curb evasion
The committee’s proposals aim to simplify the tax system, making it easier for businesses to comply and for the government to administer.
Additionally, discussions involved reducing the company income tax rate and increasing the exemption threshold for personal income tax.
Currently, Nigeria’s VAT rate stands at 7.5%. The committee identified challenges in the tax system, including the burden on businesses, the taxation of basic consumptions, and the low VAT exemption threshold for small businesses.
The proposals aim to address these issues and create a more efficient tax system.