Presidential tax committee proposes VAT removal on food, healthcare, education

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The Head of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has announced plans to recommend the elimination of Value Added Tax (VAT) on essential food, educational, and healthcare items.

Oyedele conveyed this decision on Wednesday through his social media handle, clarifying statements made earlier during a policy exposure and impact assessment session hosted by the committee.

He said, “Full input VAT credit for businesses to reduce their cost of doing business and minimise the strain on their cash flows. Remove VAT on an expanded list of basic food, educational and healthcare items to protect the poor. Harmonise all consumption taxes into one (VAT only) and adjust the revenue-sharing formula in favour of states to address a multiplicity of taxes.

“Removal of VAT on the export of service and intellectual property to promote non-oil exports, increase the threshold for VAT exemption for small businesses and enhance the VAT refund process to reduce the strain on working capital of businesses. Introduce VAT fiscalisation and electronic invoicing to curb evasion which makes honest businesses uncompetitive and consequential upward adjustment to the VAT rate on items not exempted to avoid a significant drop in revenue.”

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Stressing the objective of simplifying the tax structure, Oyedele stated, “Our proposals aim to streamline the tax system, making compliance easier for businesses and administration simpler for the government. By consolidating various taxes into a more efficient VAT system, we anticipate reduced administrative costs and improved tax adherence.”

Oyedele also revealed discussions regarding proposals to lower the corporate income tax rate and raise the exemption threshold for personal income tax. Currently, Nigeria’s VAT rate stands at 7.5 percent.

Addressing the challenges inherent in the tax system, Oyedele remarked, “Nigeria’s VAT system places a huge burden on businesses as they are not allowed to claim the input VAT incurred on services and assets. Some items which constitute basic consumptions (food, education, and healthcare) are liable to VAT rather than being exempt or zero-rated.”

He further noted that small businesses struggle with VAT compliance due to the low exemption threshold, while many states impose additional consumption taxes alongside VAT, resulting in a complex tax landscape.