Financial experts and economists have urged the National Assembly to exclude the Value Added Tax (VAT) rate from the proposed tax law to allow for more flexibility in future amendments.
The proposed tax bill, officially titled ‘An Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks Relating to Taxation and Enact the Nigeria Tax Act to Provide for Taxation of Income, Transactions and Instruments, and for Related Matters,’ is one of four tax-related bills submitted to the National Assembly by President Bola Tinubu on October 3, 2024.
A key aspect of the bill is a planned VAT increase from the current 7.5% to 10% in 2025. The rate would then rise to 12.5% between 2026 and 2029, and eventually reach 15% from 2030 onwards.
On Tuesday, the House of Representatives approved all four tax bills in a third reading. However, the Senate is still reviewing the proposals, with lawmakers debating their potential impact on businesses and consumers.
During an interview with Saturday PUNCH, Akin Oyebode, Chairman of the Forum for State Commissioners of Finance, noted that while tax law reforms are necessary, VAT should not be included in the legislation itself.
“Nigeria’s tax laws have remained largely unchanged for over 50 years. Anyone who has the country’s best interest at heart would welcome these reforms. We cannot continue operating under century-old laws.
“But VAT rates and distribution formulas should not be fixed in the law. Including VAT in the law means that every amendment would require a legal review, which is not ideal. The law should set guiding principles, while details like VAT distribution should be handled through a finance act, reviewed periodically,” he said.
Similarly, Paul Alaje, Chief Economist at SPM Professionals, also voiced concerns over the VAT increase.
“I understand their reasoning. They want to simplify the amendment process. While I support the tax bill, the VAT rate must remain unchanged. Any increase, even by 0.5%, will worsen inflation, and I can demonstrate this to anyone,” Alaje stated.
He also questioned the practicality of harmonizing tax rates nationwide, warning that it could lead to economic challenges.
