Taiwo Oyedele, chairman of the presidential committee on fiscal policy and tax reforms, has advocated for an increase in the value-added tax (VAT) rate. Speaking at a policy exposure and impact assessment seminar organized by the committee, Oyedele emphasized the need to review the VAT revenue-sharing formula.
The current VAT Act stipulates that the federal government receives 15 percent of the tax revenue, while states and local governments share 50 percent and 35 percent, respectively. However, Oyedele proposed reducing the federal government's share to 10 percent and increasing the states' portion, which would be shared with local governments, to 90 percent combined.
Explaining the rationale behind the proposed changes, Oyedele highlighted that VAT is essentially a state tax, as the federal government took over the collection of VAT from states in 1993. He emphasized the need for transparency and neutrality in the VAT distribution mechanism, aligning it with global practices observed in over 100 countries where VAT is implemented.
To mitigate the impact on businesses and the poor, Oyedele assured that basic consumption items such as food, education, medical services, and accommodation would be exempt from VAT. He also stated that the committee had engaged with businesses to ensure that the VAT reform would not result in increased prices for consumers. The aim is to conduct the reform in a manner that is beneficial to all stakeholders, including the private sector.
