Ahead of 2025, the National Assembly is considering a bill proposing an increase in the value-added tax (VAT) from 7.5 percent to 10 percent.
VAT refers to a consumption tax on goods and services levied at each stage of the supply chain where value is added.
According to reports revealed on Sunday, the national assembly is seeking to raise the tax rate to 10 percent by 2025.
The legislature also intends to increase the VAT to 12.5 percent by 2026 through 2029, according to the document.
“VAT shall be charged on the value of all taxable supplies at the following rates (a) 2025 year of assessment 10%; (b) 2026, 2027 2028 and 2029 years of assessment 12.5% (c) 2030 year of assessment and thereafter 15%,” the document reads.
On May 8, Taiwo Oyedele, chairman of the presidential committee on fiscal policy and tax reforms, had said the VAT rate needs to be increased.
Reacting to the recommendation on September 8, Atiku Abubakar, former vice-president criticised the proposed VAT hike, describing it as a “regressive and punitive policy”.
However, Wale Edun, minister of finance, on September 9, said the VAT rate has not been unchanged.
In February 2021, the International Monetary Fund (IMF) had advised the federal government to raise the VAT rate to at least 10 percent by 2022.
CIT TO BE REDUCED TO 27.5% BY 2025
Meanwhile, the bill also proposes a reduction in the corporate income tax (CIT) to 27.5 percent by 2025 — down from 30 percent — and a further cut to 25 percent by 2026.
Companies with less than N20 million turnover are exempted from paying the CIT, according to the bill.
“Tax shall be levied, for each year of assessment in respect of total profits of every company, in the case of; (a) a small company, at zero percent; and (b) any other company, at the rate of-(i) 27.5% in 2025 year of assessment, and(ii) 25% from 2026 year of assessment,” the document added.
“Notwithstanding any provision of this Act or any other enactment, where, in any year of assessment, the effective tax rate of a company is less than 15%, such company shall recompute and pay an additional tax that makes its effective tax rate equal to 15%.
“The provisions of this section shall apply to (a) a company that is a constituent entity of an MNE group; and (b) any other company with an aggregate turnover of N20,000,000,000.00 and above in the relevant year of assessment.
“The companies covered under this section and the determination of the additional tax payable shall be in accordance with regulations issued by the Service.”
On June 4, Oyedele had said the presidential committee on fiscal policy and tax reforms proposed a reduction of the CIT by 5 percent.
He said the tax rate should drop from 30 percent to 25 percent to encourage businesses and investors.
Earlier this month, the federal government released the gazetted withholding tax regulations expected to take effect from January 1, 2025.
