Nigeria’s VAT Dilemma: Oyedele Suggests Compromise on Tax Reforms

The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has suggested that Nigeria’s current Value Added Tax (VAT) structure could remain unchanged if public resistance to reforms persists. Speaking during a live interview on Arise TV on Sunday, Oyedele addressed the controversies surrounding President Bola Tinubu’s proposed tax reforms, emphasizing the importance of a unified approach to modernizing Nigeria’s tax system.

In October 2024, President Tinubu introduced four sweeping Tax Reform Bills to the National Assembly, aiming to overhaul the nation’s outdated tax framework. These included the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill. The proposals have, however, sparked heated debates, with critics arguing that reforms, particularly those targeting VAT, could exacerbate regional inequalities.

“We cannot continue with colonial-era tax laws and expect Nigeria to develop,” Oyedele said, stressing the urgent need for reforms. Yet he acknowledged the sensitivity of the VAT debate. “If the preference is to keep the current VAT formula, we’re willing to do so. But we must understand that maintaining the status quo comes with its own challenges.”

Oyedele argued that reforms to VAT allocation would ensure fairness. “Today, Lagos benefits disproportionately from calls made in Kano, Kwara, or Ekiti. We’re saying, let’s fix that inequity. Yet some interpret this as an attempt to divert resources to Lagos, which is not the case,” he explained.

Tracing VAT’s history, Oyedele noted that it was introduced by the military in 1993 to replace state-level sales taxes. However, VAT was omitted from the 1999 Constitution, leading to ongoing legal disputes. States like Rivers and Lagos have argued for the right to collect VAT directly, claiming they would benefit more from full control over their contributions.

“The current system, where companies remit VAT from their headquarters, skews revenues heavily towards Lagos and Rivers because many corporate giants like MTN, Dangote, and Airtel are headquartered there,” Oyedele said. While decentralizing VAT collection might appeal to some states, he warned it could create chaos for businesses.

As the National Assembly deliberates the reform bills, Oyedele cautioned that withdrawing the proposals could stall progress indefinitely. “If these bills are withdrawn, representing them will be an uphill task. We’ll face greater resistance and lose the momentum needed to address inequities in our tax system,” he said.

Oyedele’s remarks underscore the delicate balancing act required to reform Nigeria’s tax regime—a task fraught with political and regional complexities but seen as essential for driving economic progress.