We Must Raise The VAT Rate — Taiwo Oyedele

Taiwo Oyedele

A rise in the value-added tax (VAT) rate is deemed necessary by the presidential committee on fiscal policy and tax reform.

The committee's chairman, Taiwo Oyedele, revealed that the VAT revenue-sharing mechanism will be examined during his speech on Monday.

He delivered a speech during a committee-organized session on policy exposure and impact assessment.

The current VAT rate in Nigeria is 7.5 percent.

"We are proposing that the federal government's portion should be reduced from 15 percent to 10 percent. States' portion will be increased but they would share 90 percent with local governments," he said.

According to Oyedele, the committee suggested changing the VAT distribution mechanism because it is a state tax.

"In 1986, we had sales tax collected by states. The military came up with VAT in 1993 and stopped sales tax so they said it would collect VAT and return 15 per cent as cost of collection and that is the 15 per cent charged today came about. But we think it is too much," he said.

The tax expert went on to say that the final consumer should bear the brunt of VAT.

“So we must make it transparent and neutral and this is what over 100 countries where they have VAT are doing,” Oyedele said.

“Nigeria's economy is more than 50 percent in services and if I just stop at this, many states will be broke because VAT collection will go down by more than 50 percent and it won't even fly.

“So we therefore need to adjust the VAT rate upward. We would ensure that it doesn't affect businesses. The only thing is to look at basic consumption from food, education, medical services and accommodation will carry zero percent VAT. So for the poor and small businesses, no VAT.”

Additionally, Oyedele stated that it would probably lead to pandemonium if each state were given exclusive custody of its collections.