The presidential committee on fiscal policy and tax reforms has recommended an increase in the value-added tax (VAT) rate and a review of the revenue-sharing formula.
Committee chairman Taiwo Oyedele disclosed this during a policy exposure and impact assessment session. The proposed changes include increasing states and local governments’ share of VAT revenue to 90 percent from the current 85 percent, while reducing the federal government’s share from 15 percent to 10 percent.
Oyedele emphasized that VAT is primarily generated at the state level, making the new sharing formula favorable to lower-tier governments. He clarified that basic consumption items such as food, education, medical services, and accommodation would carry zero percent VAT to mitigate the impact on the poor and small businesses.
He assured that businesses would not increase product prices due to the VAT reform, and discussions with the private sector are ongoing to ensure a smooth transition. Additionally, Oyedele cautioned against granting exclusive custodianship of VAT collections to states, as it may lead to chaos.
Source: Vanguard