Most Nigeria’s consumption VAT come from low income earners – Presidential Committee

Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, had said majority of the consumption Value-Added Tax (VAT) the Nigerian government received over the years are from low income earners.

He said the government wants to reform its tax system to remove VAT from essential consumption, education, healthcare, transportation and accommodation to enable low income earners to enjoy the dividend of democracy.

Mr Oyedele, a fiscal policy and tax expert, said this on Wednesday when he appeared before the Senate to brief it on the tax reform bills.

Two months ago, President Tinubu sent four tax bills to the National Assembly for approval. They are the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill.

However, the bills have been attracting criticisms.

Mr Oyedele said the major VAT on consumption is from 82 per cent of low income earners in the country which according to him is part of the reasons the federal government is proposing the tax reform bills to review the policy.

“When we look at the consumer purchasing index by the Bureau of Statistics, all the consumptions in Nigeria are classified into 12 categories. These very essential consumptions constitute 82 per cent of where our people spend their money, particularly the low income earners. We have proposed in the bill before you to remove the VAT on these essential items.

“Our proposal is that education should not carry VAT, whether it is hidden or revealed VAT. Our proposal is that education and health should not carry VAT. Transportation, of course, if you hire a car, you pay VAT, but if you enter public transportation, you should not have to pay VAT because you need that for your survival. Going back and forth, the same thing with accommodation. Let people be able to put the roof over their head,” he stated.

Mr Oyedele noted that the bills only recognise one VAT on consumption but explained that it will not be a basic need.

“In other words, four out of every five consumption by the masses will no longer carry VAT. Only one will carry VAT, and that one that is carrying VAT is not the most basic thing, which means people at the high income end and the ones who tend to spend a lot of money on those things. While we’re not saying they should not spend money to enjoy their lives, we’re saying they should please give us a little for us to fund government.”

More value for businesses, more tax

Mr Oyedele emphasised that the provision of the bills also creates a friendly environment for businesses.

He said if a business entity is creating more value for the country, the tax will be increasing by a certain percentage.

“Today, our tax laws come in the way of you restructuring your business to be efficient. It is almost like a crime for you to want to restructure your businesses to be efficient. We believe we must address that.

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“Allow businesses to operate efficiently. The more efficient they are, the more value they can create. The more value they create, the more taxes they can pay to the government.

“Last but not least, the important highlight on this Nigerian tax bill is that our small businesses are overburdened with taxes,” he said.

Mr Oyedele also said the bills would protect small businesses in the country.

“They have to pay VAT. They have to do withholding tax, companies income tax, an endless amount of levies and charges, particularly at the local government level. We believe that it is time for us to create a threshold that is high enough to protect the small businesses,” he said.