The Chairman of the Presidential Tax Reform Committee, Mr. Taiwo Oyedele, has forecasted a dramatic increase in Nigeria’s VAT revenue, suggesting that it could double in less than two years if a proposed tax reform bill passes through the National Assembly.
He argued that the reform, which would streamline tax collection processes and allocate more responsibility to states, would not only boost national revenue but also incentivize state governments to actively support economic activities within their jurisdictions.
Speaking at a public engagement on the proposed tax reforms, Oyedele emphasised that the reforms were designed to shift the balance of revenue collection away from federal agencies and allow states to become more involved in managing and collecting Value-Added Tax (VAT).
This, he believes, would result in both immediate and long-term fiscal benefits for the country.
Under the new tax reform proposals, federal bodies such as the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigeria Customs Service (NCS) would have their roles in revenue collection suspended.
The reform intends to streamline the tax process and place greater responsibility on state governments to collect and manage VAT within their territories. In return, states would be incentivized to focus more on the economic activities within their regions, potentially driving more efficient tax collection and fostering local business growth.
“We’ve looked at it closely and we believe that, within two years, VAT revenue could actually double if this reform goes through,” Oyedele stated.
“The reason is simple: When states have a stake in VAT collection, they will be more motivated to develop and support the economic activities within their jurisdiction. It’s a win-win situation.”
He also explained that the new approach would empower state governments to boost local economic development by directly linking their fiscal health to the growth of businesses and trade within their borders.
This shift in responsibility would encourage states to actively promote a business-friendly environment to maximize their tax revenues.
One of the key aspects of the proposed reforms is the principle of fiscal equalisation, designed to ensure that no state loses out on revenue in the transition to a more decentralised system.
Oyedele highlighted that states would be guaranteed a minimum level of revenue, with a buffer to prevent any immediate financial shortfalls.
“We’ve worked with the federal government to ensure that states face zero risk,” Oyedele said.
“We’re proposing that the federal government reduces its share of the revenue pool by five percent, which will be reallocated to the states. This ensures that no state will collect less than it would under the old formula.”
The reform aims to ensure that while states gain greater control over their VAT revenue, they will not face any financial loss during the transition period.
With this mechanism in place, the federal government’s share of VAT revenue would be reduced from 15 per cent to 10 per cent, with the additional funds directed to state governments.
As part of the broader reform package, Mr. Oyedele also emphasised the importance of reducing the number of federal agencies involved in tax collection.
He revealed that the legislation would seek to remove about 60 federal agencies from the tax collection process, allowing them to focus on their core responsibilities.
“We believe that by limiting the number of agencies involved in tax collection, we can reduce inefficiencies, improve oversight, and ultimately enhance the overall performance of the tax system,” Oyedele explained.
