The Nigeria Governors’ Forum (NGF) has opposed the proposed increase in Value Added Tax (VAT), deeming the move untimely,Daily Trust reports.
The decision was made during a meeting in Abuja on Thursday, where the governors reaffirmed their support for the ongoing legislative review of the Tax Reform Bills.
In 2024, Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, had announced plans to propose legislation to raise VAT from the current 7.5% to 10%. He explained, “Our tax revenue system faces significant challenges. The entire fiscal system is in a state of crisis, and revenue, both tax and non-tax, is abysmally low. Even dedicating all revenue to infrastructure would be insufficient.”
Oyedele outlined the committee’s mandate, which includes addressing governance issues, transforming revenue collection, and managing government assets. He noted that the proposed VAT increase would take effect from 2025, with subsequent incremental adjustments planned.
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At the IMF/World Bank Annual Meetings in Washington DC, Minister of Finance and Coordinating Minister of the Economy, Wale Edun, reiterated the proposal, emphasizing a phased implementation. He assured that essential items consumed by vulnerable Nigerians would remain exempt from VAT or attract a zero rate, while the increase would primarily target luxury goods.
In a communiqué issued on Thursday, the governors outlined their resolutions:
- Reaffirmation of their commitment to reforming Nigeria’s outdated tax laws to enhance fiscal stability and align with global standards.
- Endorsement of a revised VAT sharing formula:
- 50% based on equality
- 30% based on derivation
- 20% based on population
- Advocacy against any immediate VAT rate increase or reduction in Corporate Income Tax (CIT) to safeguard economic stability.
- Support for maintaining VAT exemptions on essential goods and agricultural products to protect citizens and promote agriculture.
- Recommendation for retaining the roles of TETFUND, NASENI, and NITDA in development levy allocations without terminal clauses.
- Endorsement of the legislative process for the Tax Reform Bills to achieve eventual passage.
The governors emphasized the need for balanced fiscal policies that prioritize economic stability and social welfare.
