Tax bills: N’Assembly urged to exclude VAT

The National Assembly has been urged to exclude the Value Added Tax rate from the proposed tax laws to allow easier amendments in the future.

 The Nigerian tax bill, 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 bills sent to the National Assembly by President Bola Tinubu on October 3, 2024.

The bill proposes a gradual increase in VAT from the current 7.5% to 10% in 2025, 12.5% between 2026 and 2029, and 15% from 2030 onwards.

On Tuesday, the House of Representatives passed the four tax bills for third reading, while the Senate is still deliberating on the proposals.

Speaking with Saturday PUNCH, the Chairman of the Forum for state Commissioners of Finance, Akin Oyebode, stated that while tax law reforms were long overdue, VAT should not be embedded in the legislation.

He said, “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.”

Similarly, a Chief Economist at SPM Professionals, Paul Alaje, also expressed concerns about the VAT rate hike proposal.

“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 said.

He further questioned the feasibility of harmonising tax rates, warning that it could create economic complications.