Taiwo Oyedele, the Chairman Presidential Committee on Tax and Fiscal Reforms, has explained reasons the Value-Added Tax (VAT) rate Reform will only contribute to decline in inflation rather than increasing it.
Oyedele said this via his verified X handle, emphasizing that the planned adjustments to VAT rate within Nigeria’s Tax Reform Bills are designed to curb inflation rather than exacerbate it.
This comes amidst public concerns that any increase in VAT could lead to higher prices and economic hardship for citizens.
Addressing Inflation Concerns, Oyedele highlighted the following measures aimed at reducing inflation:
- Exemptions and Reductions: A notable 82% of everyday consumption items like food, medical services, education, and transport will either be exempt or subject to a zero VAT rate. This directly targets the costs borne by the masses, aiming to keep essential goods affordable.
- Input VAT Credits: Businesses will now receive credits for VAT paid on their inputs, effectively making them VAT cost-neutral. This policy is expected to lower production costs, which should translate into reduced prices for consumers.
- Support for Small Businesses: The threshold for VAT exemption for small businesses is being raised from N25 million to N50 million annual turnover, further shielding the informal sector and small enterprises from VAT burdens.
Selective Rate Increase: Only 18% of goods and services, primarily non-essential items like beverages and luxury goods, will see a VAT rate increase. This is intended to ensure that the tax system remains progressive, with higher earners bearing more of the tax burden. - Economic Impact Explained: The reform aims to prevent businesses from passing on VAT costs to consumers by allowing them to offset input VAT against output VAT without prior approval from tax authorities. Should a business have excess input VAT, a new system promises refunds within 30 days, ensuring financial fluidity.
He also addressed the concerns about potential price gouging due to misunderstood reforms are being addressed by promoting a better understanding of the policy. The reform’s design ensures that any attempt to unjustly increase prices would be against the spirit and mechanics of the new VAT system.
Taiwo Oyedele highlighted that “Current Prices (CP) – Input VAT Credit (IC) – Rate Reductions and Exemptions (RR) – Small Business Exemptions (SB) + Rate Increase on Non-Essentials (RI) = Lower Prices Overall. For those seeking further details, the fiscalreform.ng website and associated social media channels offer comprehensive resources on the Tax Reform Bills, aiming to keep the public well-informed and engaged.”
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