The Nigerian Federal Government expressed alarm over the country’s underperforming Value Added Tax (VAT) compared to other nations in the West African region. The government highlighted the need for policy changes, emphasizing that Nigeria’s VAT rate is less than one percent of the Gross Domestic Product (GDP).
The Director of Tax Policy in the Federal Ministry of Finance, Budget, and National Planning, Basheer Abdulkadir, voiced these concerns during a workshop aimed at aligning Nigeria’s VAT Act with ECOWAS directives. The workshop, organized by the ECOWAS Commission, sought to enhance tax management and coordination in West Africa.
Abdulkadir observed that Nigeria’s VAT performance and rate are among the lowest in the region, with an average VAT rate of 16 percent compared to Nigeria’s 7.5 percent. He emphasized the importance of policy adjustments in tax administration and proposed aligning Nigeria’s VAT exemptions with those of ECOWAS. He further suggested exempting certain products, goods, and services from VAT to benefit disadvantaged households.
Opinion:
The concern raised by the Nigerian government regarding the country’s low VAT performance is indeed valid. VAT is an essential source of revenue for governments worldwide, enabling them to fund public services and implement developmental projects. Nigeria’s VAT rate of less than one percent of GDP indicates a significant gap between the potential revenue that can be generated through VAT and the actual collection.
To address this issue, policy changes in tax administration are crucial. Streamlining and aligning Nigeria’s VAT exemptions with ECOWAS directives would not only enhance revenue mobilization but also contribute to regional harmonization. Additionally, targeted exemptions for certain essential goods and services could provide relief to low-income households, ultimately improving their economic conditions.
Overall, it is imperative for the Nigerian government to prioritize VAT reform, focusing on policy adjustments and efficient tax administration. By implementing effective strategies and aligning with regional directives, Nigeria can boost its VAT performance, enhance revenue generation, and provide adequate support to its citizens.
Punch.