Taiwo Oyedele: Proposed VAT reform will reduce inflation rate, protect SMEs

Taiwo Oyedele, chairman of the presidential committee on fiscal policy and tax reforms, says the proposed value-added tax (VAT) reform will reduce inflation, protect small and medium enterprises (SMEs), and support business growth.

Oyedele spoke on Friday at an interactive session with the Organised Private Sector of Nigeria (OPSN) on the urgency and benefits of the four proposed Nigeria tax reform bills.

On October 3, President Bola Tinubu asked the national assembly to consider and pass four tax reform bills.

The proposed laws include the Nigeria tax bill, tax administration bill, and the joint revenue board establishment bill.

Tinubu is also seeking to repeal the law establishing the Federal Inland Revenue Service (FIRS) and replace it with the Nigeria Revenue Service.

Oyedele said the reforms would benefit SMEs by increasing the tax exemption threshold from N25 million to N50 million in annual turnover and exempting small businesses from company income tax (CIT).

For households, he said the bills are set to exempt low-income earners who make up to N1 million per year from paying personal income tax.

He noted that the consumer purchasing index (CPI) basket consists of 12 categories on which low-income households spend nearly all their income.

“The low-income households spend nearly 100 percent of their income on these basic consumptions,” he said.

“These include cereal and bread, tubers, meat and fish, rent, road transportation, pharmaceutical items and medical services, books and stationery.”

Oyedele also explained that the bills aim to simplify Nigeria’s tax system by repealing certain tax laws and merging them into a single, unified law called the Nigeria Tax Act.

He said the Act will address taxation of income, transactions, and instruments, making it easier for individuals and businesses to understand their tax responsibilities.

“2024 withholding tax regulations proposed changes seek to exempt small businesses from withholding tax obligations and lower rates for businesses with low margins,” Oyedele said.

“It also exempts manufacturers and producers such as farmers, and moves to curb tax evasion and avoidance.”

Francis Meshioye, chairman of OPSN and president of the Manufacturers Association of Nigeria (MAN), emphasised that the four bills before the national assembly are crucial for creating a favourable business environment.

Meshioye said the private sector is key to driving sustainable economic growth and urged stakeholders to take full advantage of the interactive session to understand the benefits and maximise them.

‘WE’RE CONCERNED ABOUT IMPACT OF BILLS ON INVESTMENTS’

Segun Ajayi-Kadir, director-general (DG) of MAN, said the tax reform bills have sparked interest among Nigerians, adding that he is concerned about the potential impact of the bills on business investments and sustainability.

Ajayi-Kadir said multiple taxation is the biggest concern for manufacturers, according to the manufacturers CEO confidence index (MCCI), and despite efforts to address the issue with all levels of government, the problem persists.

“Unorthodox and demeaning methods of collecting legal and illegal taxes, by state and non-state actors, have remained a permanent feature of our business life across the country,” the DG said.

“These, and many more, are the reasons this reform is of significant importance to our profitability and competitiveness.

“It is evident that the outcome of this reform initiative of President Bola Tinubu in general and the fate of the tax reform bills will redefine the business landscape in an unprecedented fashion.”

Ajayi-Kadir called for a fair tax system, saying manufacturers will willingly pay taxes if treated justly.