Nigeria’s Presidential Tax and Fiscal Policy Reforms Committee, headed by Taiwo Oyedele has accused the tuch in the country of not paying taxes commensurate with their income .
This is just as he is proposing a significant shakeup of the country’s tax system.
The plan aims to address revenue shortfalls while mitigating the impact on ordinary Nigerians.
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Phased VAT Increase: The Value Added Tax (VAT) rate would rise from 7.5% to 10%, but implemented gradually to minimize price shocks.
Focus on Luxury Goods: The VAT increase would primarily target non-essential goods and services, with exemptions for basic necessities like food, education, and medical care.
Improved Tax Compliance: The committee seeks to increase tax compliance rates from 30% to over 90%, potentially through stricter enforcement and deterrents.
Company Tax Reduction: Corporate income tax would be reduced from 30% to 25%, also implemented in phases.
Streamlined Tax Categories: The myriad of existing taxes and levies would be consolidated into eight simplified categories.
Revenue Sharing Reform: The proposed VAT revenue sharing formula would allocate a larger portion (55%) to states, with a smaller share for the federal government (10%).
Impact on Inflation: The committee acknowledges the potential for the VAT increase to fuel inflation, but argues that improved compliance and a focus on non-essentials will mitigate this risk.
Data-Driven Approach: The proposal to target wealthy tax evaders is backed by data indicating less than 10% of affluent Nigerians fully comply with their tax obligations.
Constitutional Change for VAT: The committee proposes enshrining VAT collection in the constitution to ensure stability and potentially increase collection efficiency.
The proposed reforms represent a delicate balancing act between raising government revenue and minimizing the burden on citizens.
The success of this plan will depend on effective implementation, particularly in boosting compliance and ensuring the VAT increase doesn’t disproportionately impact essential goods.
Source:Global Finance Digest
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