Oyedele conducts poll on proposals seeking to increase VAT rate, exempt essential items

Taiwo Oyedele, chairman of the presidential fiscal policy and tax reforms committee, has conducted a poll on proposals seeking to exempt education, food, healthcare, and other on essential items from value-added tax (VAT).

Oyedele launched the poll on his X handle on Monday, inviting Nigerians to offer their thoughts on the proposals which also include VAT exemptions for rent, transportation, and small businesses.

The tax expert said the committee is also proposing a zero percent VAT rate on intellectual property and services as part of a broader initiative to encourage export.

“Data by the NBS shows that these are the areas where the average household spends almost all their income, meaning their VAT burden will reduce,” he posted.

“The upward rate adjustment is on non-essential items to partly offset the impact of the reduction in rate and exemption for essential items, ensuring that the masses are protected and providing some cushion for states who earn 85% of VAT revenue.

“Businesses will also get full credit for the VAT they pay on their assets and services, thereby lowering their overall costs and moderating inflation.”

Making a case for a new tax regime, Oyedele said under the current system, “many essential items constituting 82% of the total consumption of an average household attract VAT while some are exempt”.

“Other forms of consumption taxes exist in some states in addition to VAT. Businesses are unable to recover VAT on their assets and services, thereby increasing their costs, which they pass on to consumers.

“Many small businesses are required to charge VAT on their sales. VAT refunds require extensive tax audits and take a long time to process. Sharing of VAT revenue to and among states is contentious.

“Export of services and intellectual properties bear VAT making their export less attractive.”

THE VAT REFORM PROPOSAL

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The Presidential Fiscal Policy and Tax Reforms Committee’s proposal is to reduce the VAT rate to zero per cent (0%) on food, health, education, and exemption for rent, transportation, and small businesses. Data by the NBS shows that these are the areas…

— Taiwo Oyedele (@taiwoyedele) September 9, 2024

While the new tax system proposes VAT exemptions on food, education, healthcare, rent, and transport, the committee chairman said it would discontinue other consumption taxes and “charge only VAT where applicable”.

He stressed that the proposed VAT regime would “increase rate on non-essential items to partly offset reduction on essential items”.

“Over 97% of SMEs will be exempted from charging VAT on their sales.” Oyedele said.

“VAT refunds will be faster without the need for extensive tax audits to help business cash flow.”

Oyedele’s poll intends to know if Nigerians are in support of the proposed VAT reforms or whether the current system is preferred.

At the time of this report, only 9,885 X users participated in the poll, with 63 percent voting in support of the proposed reforms, 24 percent favouring the current regime, while 14 percent said they were not sure.

The tax expert has over 52,000 followers on his X handle.