- Taiwo Oyedele said Nigeria’s tax system is outdated and backward
- The tax reform committee chairman called for a centralised tax collection system
- Other contents of the tax reform are VAT increment and streamlining of tax collection
Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, says Nigeria’s tax system is among the most outdated globally and requires urgent reform,
Oyedele stated this while on Channels Television at the weekend and said Nigeria’s tax system still operates under a 1939 stamp duty law, describing it as “embarrassing.”
His comment follows the recent tax reform bills, the Nigeria Tax Bill, the Tax Administration Bill, and the Joint Revenue Board Establishment Bill, which have seen varying opinions and oppositions.
Oyedele noted halting the reform process would be a setback for the nation and urged stakeholders to support the tax reform bill given the level of presidential support it has received so far.
He noted that allowing states to collect Value-Added Tax (VAT), as governors are currently clamouring for, would lead to “chaos” and would create disparities, reducing the revenue some states would collect and potentially hurting businesses.
Oydele said, “If we get a judgment from the Supreme Court today that VAT should be collected and administered by states, that will be chaotic. States will collect less, businesses will suffer, and the economy will retrogress.
“If it (tax reform) doesn’t work, that would be a big shame for our country. I don’t know whether it will happen again in my lifetime where you have this level of commitment from the highest level for a holistic reform.
“I have done all my career in Nigeria. Nigeria’s tax system is one of the most backwards in the world; it is embarrassing. We had laws we inherited from our colonial masters. The stamp duty law is the law of 1939. We are in 2024. So, anything that stops the process of trying to reform that will be really, really sad. So I don’t want to envisage that option.”
Tax collection should be centralised
Oyedele noted that the bills' central theme is the centralisation of tax collection. He noted that the proposed tax reform bills suggest a unified approach in which the Federal Inland Revenue Service (FIRS) would handle VAT collection on behalf of all states.
He added that the reform intends to enhance data accuracy, improve economic planning, and reduce business compliance burdens by centralising VAT and other tax collections.
“Whatever you do in Abia, whatever you do in Kogi, reflects on the system and that helps us a lot,” Oyedele noted.
The need for tax centralisation has been a recurring message of the tax committee chairman. Since the committee’s inauguration in August 2023 by President Bola Tinubu, it has been concerned with creating a new tax framework that will drive economic growth and development.
The committee recommended streamlining and harmonising taxes and levies paid by businesses and individuals into eight categories to make tax administration modern, simple, adaptive, and enable economic growth.
Oyedele said the proposed list of taxes and levies would include income tax, property tax, VAT, customs duties, excise tax, stamp duties, special levy and harmonised levy.
He also said the Federal Government is working towards a system that will exempt 95 per cent of businesses in the informal sector that mostly earn N25 million or less yearly from paying all taxes, including withholding tax, company income tax and payroll taxes.
In early September, Oyedele disclosed that the Federal Government would soon sign the committee’s proposal to remove taxes, including VAT, on food, public transportation, house rents, health care, and education, which are necessities.
In June, he stated that the plans to increase the VAT rate to 10 per cent would be implemented in phases. However, in a post on his X handle on Monday, September 10, Oyedele said the increase in VAT on non-essential items will help offset the VAT reduction on essential items like food, healthcare, and education.
Other components of the reform
In addition to VAT adjustments, the bills propose raising VAT to 10 per cent by 2025, reducing corporate income tax to 27.5 per cent and increasing the personal income tax for high earners from 20 per cent to 25 per cent.
Oyedele said these changes will boost revenue and also incentivise states to promote economic activities within their jurisdictions.
The proposal also includes streamlining tax collection across Nigeria. Oyedele said the proposal will stop federal agencies like the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigeria Customs Service (NCS) from collecting taxes that are outside their core mandates.
If the bills are enforced, approximately 60 federal agencies would no longer collect taxes, focusing instead on their primary functions, while tax agencies would handle all collections.
Oyedele noted that reform is designed to encourage cooperation between federal and state tax authorities, promoting data sharing and intelligence building across jurisdictions. The proposed Joint Revenue Board would enable a unified tax system in which data flows seamlessly between states, local governments, and the federal government.
VAT rate hasn’t been increased, remains 7.5%, Finance Minister Edun clarifies
Meanwhile, TheRadar reported that the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, says the rate for Value-Added Tax (VAT) has not been increased but remains 7.5 per cent as contained in the relevant tax laws and chargeable on goods and services.
In a statement on Monday, September 9, Edun debunked reports that the VAT rate has been upwardly adjusted to 10 per cent from 7.5 per cent.
