Taiwo Oyedele, the chairman of the Presidential Tax Reform Committee, announces that new tax reforms will phase out all state-level consumption taxes except Value Added Tax (VAT). In a recent FAQ release, Oyedele clarifies that the proposed changes aim to simplify and streamline the nation’s tax system.
The key change in the reforms is the removal of parallel consumption taxes imposed by various states, which have led to a higher tax burden on citizens. Oyedele explains that VAT will remain, but all other consumption taxes will be eliminated. To address concerns about revenue loss for certain states, the proposed reforms include a 5% allocation to equalize transfers. This fund will help states that may collect less revenue under the new model, ensuring that no state is disadvantaged.
“The reform aims to reduce multiple taxation and enhance economic activity by discontinuing all consumption taxes other than VAT,” Oyedele states. “The equalization transfer ensures that no state faces a revenue shortfall in the short term, while boosting overall economic growth in the long run.”
Oyedele also addresses the status of federal agencies like the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Customs Service (NCS). He confirms that these agencies will not be merged or abolished but will continue to operate according to their regulatory mandates. However, they will no longer collect regulatory fees in their respective areas; this responsibility will be handled through the national budget.
The proposed changes, now under review in the National Assembly, have sparked debate. Some northern leaders have expressed concerns that their regions may not benefit as much from the new VAT distribution model. Currently, VAT revenue is divided among federal, state, and local governments, with additional factors like population and equality considered in the allocation. The reforms seek to address these complexities and harmonize tax structures across Nigeria, aiming to reduce tax burdens and improve revenue collection efficiency.
