The House of Representatives has decided to keep Nigeria’s Value Added Tax (VAT) at 7.5% and rejected a proposal to gradually raise it to 15% by 2030. This decision was part of the ongoing discussions on the Tax Reform Bills currently being debated at the National Assembly.
The House also rejected the proposed reintroduction of an inheritance tax, which was presented under the concept of family income taxation. This move has sparked reactions from various groups and organizations across the country.
The Nigerian Chamber of Commerce, Industry, Mines, and Agriculture (NACCIMA) has stated that it will wait for the full details of the approved reforms before commenting. Meanwhile, the Movement for Socialist Alternative (MSA), a member of the Joint Action Front (JAF), has urged Nigerians not to celebrate just yet.
During a plenary session in Abuja, the Chairman of the House Committee on Finance, James Faleke, presented the committee’s report, which he described as a thorough review incorporating public input.
The Tax Reform Bills consist of four main pieces of legislation: the Nigeria Tax Bill, the Nigeria Tax Administration Bill, the Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill.
Among the major changes in the bills is a revision of the Nigeria Revenue Service (NRS) Bill. The NRS will no longer have authority over individual taxpayers in states and the Federal Capital Territory (FCT), shifting its focus solely to federal-level revenue collection. Additionally, the governing board of the NRS will now include six executive directors, each representing a different geopolitical zone, appointed by the President.
Another notable amendment involves the Joint Revenue Board Bill. The committee removed the requirement for Tax Appeal Commissioners to have experience in managing businesses, arguing that this was unnecessary. It also ensured the independence of the Tax Ombud’s office by funding it directly from the Consolidated Revenue Fund rather than allowing external contributions that could compromise its neutrality.
For the Nigeria Tax Administration Bill, several practical adjustments were made. The timeline for issuing taxpayer identification numbers (Tax IDs) has been extended from two working days to five, while companies shutting down must now file their income tax returns within three months instead of six.
The VAT system was also modified to ensure that taxable supplies are recorded based on their place of consumption, regardless of where returns are filed. This change is expected to address regional disparities in tax revenue distribution. A new VAT fiscalisation system has been introduced, requiring additional regulations to enhance efficiency.
Another key amendment raises the reporting thresholds for banking transactions. Individuals must now report transactions above ₦50 million, while corporate entities must report those exceeding ₦250 million, up from ₦25 million and ₦100 million, respectively. The tax authority must now also obtain court approval before seizing movable assets.
The amendments also introduced stricter penalties for Virtual Assets Service Providers (VASPs) that fail to comply with tax regulations, including significant fines and possible suspension of licenses.
A revised formula for distributing VAT revenues among local governments has also been adopted, with 70% being shared equally and 30% allocated based on population size.
Despite these changes, the House maintained the VAT rate at 7.5%, rejecting the proposed gradual increase to 15% over the next six years. Other tax adjustments include reducing the tax rate for petroleum gains to 30%, down from the previously proposed 85%. Additionally, excise duty provisions were removed from various bills due to concerns about their economic impact.
While some Nigerians welcome the decision to maintain VAT at its current rate, others remain skeptical about the overall impact of the Tax Reform Bills.
Speaking on the development, President of NACCIMA, Dele Oye, stated: “I need to see what was approved. I cannot comment without details as we had a lot of comments on the draft bill.”
The Movement for Socialist Alternative (MSA), through its General Secretary, Dagga Tolar, also expressed concerns. According to him, “We must not be in a hurry, to applaud this House of Representatives’ rejection of increase in VAT. It is not far-reaching enough bearing in mind that this is only one feature of the Tax Reform Bill that aims to grasp more from the little never enough earnings of the working population, while granting a tax holiday to members of the billionaire club.”
Tolar further noted that the working class continues to struggle with inflation, mass unemployment, and low wages, while the wealthy elite remain largely unaffected by VAT increases. He called on labor unions to demand a higher minimum wage and push for a progressive tax system where billionaires contribute more.
