Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has addressed criticisms about the speed of the reforms, describing them as urgent and necessary given Nigeria’s economic realities.
“We are at a stage today where the majority of people are struggling—small businesses face over 60 official levies and taxes, over 200 unofficial ones,” he said. “If you want to provide relief for your people, you should do it in a hurry because it’s urgent; it’s an emergency.”
In an interview on ARISE NEWS on Wednesday, Oyedele defended the urgency of the proposed tax reform bills, emphasising the need to address economic challenges, promote fairness, and ensure equity in revenue sharing.
Oyedele outlined how the reforms aim to resolve systemic issues in the value-added tax (VAT) system and provide relief for struggling Nigerians.
He explained that the current VAT allocation formula—20% based on derivation, 50% equality of states, and 30% population—is flawed. Oyedele pointed to litigation initiated by Lagos and Rivers States, which argues that VAT collection should be under state control since it is not explicitly mentioned in the constitution.
“Most likely, if we get the judgement from the supreme court, it will say states should administer it,” he said. “When a state administers VAT, then it becomes 100% derivation. It is important for us to understand that our proposal to move derivation to 60% is actually a middle ground. If we lose the opportunity of getting this 60% derivation, we are likely to end up with 100% derivation, which, to be honest, is not bad but is going to create a lot of problems for businesses and economic growth.”
Oyedele further noted that the current system attributes VAT revenue to states where payments are made rather than where consumption occurs, which disproportionately benefits Lagos State. In 2023, Lagos accounted for over 80% of VAT revenue, despite its economy being about 30% of the national total.
“To promote equity and stimulate economic activity across the country, the reform proposes attributing VAT to where consumption takes place and increasing the share of VAT revenue states retain,” he said.
Responding to concerns that subnational governments were not adequately consulted, Oyedele clarified that extensive engagements were held with stakeholders, including finance commissioners, revenue service chairpersons, and governors. However, he acknowledged limitations in reaching all governors directly.
“We also had engagement with the governors themselves, but you would imagine that if you manage to get the airtime to speak to governors, either through the governors’ forum or the national economic council, they are unlikely to give you one hour or two hours, so there was a particular meeting where we got 15 minutes.” He said
“We understand they have a very busy schedule, we also recognise that they may not be in the best place to deal with the technicalities of what we were dealing, that is why we spent more time with their finance commissioners and with the revenue service chairpersons across Nigeria.”
On addressing multiple taxation, Oyedele noted that some states impose additional consumption taxes, creating financial strain for businesses and individuals. He explained that the reform seeks to harmonise consumption taxes under VAT and redistribute a portion of federal VAT revenue to states.
“We convinced the federal government to reduce its share of VAT from 15% to 10%, reallocating the remaining 5% to states,” he said. “This amount exceeds what states currently collect from multiple consumption taxes and ensures efficient, centralised tax collection.”
Oyedele dismissed allegations of third-party involvement in tax administration, clarifying that the bills explicitly prohibit the use of consultants for tax collection or assessment.
“We want to outlaw cash payments of taxes and enable digital options like USSD, bank cards, and transfers,” he said. “Third parties can only assist with technology implementation, not tax collection.”
While acknowledging lessons from the ongoing debate, Oyedele maintained that the reforms are critical for promoting fairness, addressing economic challenges, and improving Nigeria’s fiscal policy framework.
Faridah Abdulkadiri
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