The Nigerian government expressed concern on Tuesday, stating that the country’s Value Added Tax (VAT) performance was the weakest among West African nations.
This development was regarded as troubling, emphasizing the necessity for policy changes. It was disclosed that Nigeria’s VAT rate constituted less than one percent of the Gross Domestic Product (GDP).
Basheer Abdulkadir, the Director of Tax Policy at the Federal Ministry of Finance, Budget and National Planning, raised these concerns during the commencement of a three-day workshop on harmonizing Nigeria’s VAT act with ECOWAS directives.
The workshop was organized by the ECOWAS Commission as part of the implementation of the Support Programme for Tax Transition in West Africa (PATF).
PATF aims to enhance domestic tax management and foster better coordination within the ECOWAS and West African Economic and Monetary Union (WAEMU) regions.
Abdulkadir acknowledged that Nigeria’s VAT exemptions were not aligned with those of ECOWAS, and suggested the exemption of certain products, goods, and services from VAT to benefit impoverished households through the VAT policy.
He stated: “Our VAT performance or rate is still one of the lowest. Nigeria has a VAT of less than one per cent to the GDP and this is worrisome. Also, we have the lowest VAT within the sub-region with an average of 16 per cent while the VAT rate in Nigeria is 7.5 per cent. So we need a lot of police changes in tax administration as we also need to come up with strategies to address some of these issues.
“Also, the exemptions of VAT in Nigeria is not aligned with those of the ECOWAS and we know that these exemptions are some of the issues to do with revenue mobilisation under the VAT. We need to align our exemptions with the ECOWAS directive. There is also a need to allow for tax input credits for intermediate and capital expenditures. Like I said, we need to exempt a few products, goods and services from VAT so that we allow the poor households benefits from the VAT policy.”
Speaking, the director of VAT, Federal Inland Revenue Service (FIRS), Lovette Onanuga, who observed that VAT has the potential to raise a significant amount of revenue for the government, said the FIRS was not resting on its oars to ensure that the revenue profile of Nigeria is improved.
Noting that ongoing reforms were yielding tremendous results, she said FIRS in 2021 collected a total VAT of N2.511 trillion as against the collection of N2.702 trillion in 2021.
Onanuga, while reiterating Nigeria’s commitment to ensuring the success of the PATF programme, described the workshop as timely.
She stated: “These three days’ workshops are very important. For example, the study of the Harmonisation of Nigeria’s VAT Act with ECOWAS Directives will contribute to establishing coherence in the domestic systems of taxation and the realization of the attainment of a common market and the Evaluation of VAT Performance will enable us to look more deeply into issues that will help improve VAT revenue collections.
“I, therefore, urge that we participate actively in these workshops and see ourselves as one team working for the development and progress of our country Nigeria as we commence our deliberations”
