The Presidential Tax Reform Committee, chaired by Taiwo Oyedele, has introduced a transformative plan to simplify Nigeria’s tax structure by eliminating all state-level consumption taxes except for the Value Added Tax (VAT).
Unveiled on Monday, the proposed reforms target long-standing issues of excessive taxation, regulatory complexity for businesses, and equitable revenue distribution among Nigeria’s states.
“The imposition of parallel consumption taxes in some states increases the tax burden on the people and contributes to multiple taxation. This reform seeks to address that by making VAT the singular consumption tax across Nigeria,” Oyedele stated, underscoring the need to streamline Nigeria’s tax framework.
To address concerns about revenue distribution under the new VAT-based system, Oyedele highlighted a five percent equalization fund. This fund is designed to support states that might see reduced revenue as they transition away from their local consumption taxes. “The five percent ceded by the Federal Government will ensure all states are supported, preventing any immediate revenue shortfalls and ultimately stimulating state economies for long-term growth,” he explained.
The reform package also proposes adjustments for major revenue agencies, including the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Customs Service (NCS). Under the new model, these agencies would retain regulatory oversight but shift away from collecting regulatory fees directly. Instead, their budgets will be integrated into the federal budgeting process, reducing overlap and streamlining operations.
These comprehensive tax reforms are expected to create a fairer and more sustainable financial system for Nigeria, fostering economic growth while easing the tax burden on citizens and businesses alike.
