EU Takes Issue With Nigeria's Low VAT Rate And Lack Of Transparency

Nigeria's 7.5% value added tax (VAT) rate has been deemed low and ineffective by the European Union and ECOWAS.

De Luca attributed corruption and inadequate implementation as the reasons for Nigeria's low VAT compliance rate.

VAT is a consumption tax that is paid at the time services and goods are rendered and purchased. The tax has multiple stages. The final consumer bears the cost of VAT. Everything except those expressly exempted by the VAT Act is subject to taxation.

Nigeria's 7.5% Value Added Tax (VAT) rate has drawn criticism from the European Union (EU) for being too low and ineffective.

This statement was made during the 4th Session of the Steering Committee of the Support Program for Fiscal Transition in West Africa (PAFT) in Abuja by Massimo De Luca, Head of Cooperation and Delegation of the EU to Nigeria and ECOWAS.

De Luca emphasized the opaqueness of Nigeria's VAT system, noting that companies find it difficult to recover the VAT they pay on purchases, which makes compliance difficult, particularly for Small and Medium-Sized Businesses (SMEs).

He underlined that revenue generation is hampered by the standard VAT rate's low rate and demanded a strong system to draw in investment.

Another speaker at the event, Mr. Andrew Onyenakwe, advocated for simplifying Nigerian tax laws to make administration easier.

Concerns about Nigeria's opaqueness and erratic laws, which deter investors, were also raised by the EU. They emphasized the necessity of stopping tax evasion, particularly transfer pricing plans that move profits abroad to evade paying taxes.