The National Assembly is reportedly reviewing a bill aimed at increasing the value-added tax (VAT) rate from 7.5% to 10% by 2025, according to AFRIPOST.
VAT is a consumption tax levied on goods and services at every stage of the supply chain where value is added. The proposed bill, seen by TheCable on Sunday, suggests a gradual increase in VAT rates, starting with 10% in 2025. Between 2026 and 2029, the VAT is expected to rise further to 12.5%, and eventually reach 15% by 2030.
The document outlines the following VAT schedule:
10% for the 2025 assessment year,
12.5% for the 2026 to 2029 assessment years,
15% from 2030 onward.
This proposal comes after Taiwo Oyedele, head of the Presidential Economic Policy and Tax Reform Committee, recommended a VAT increase on May 8. However, former Vice President Atiku Abubakar criticized the proposed VAT hike on September 8, calling it a “regressive and punitive policy.” In contrast, Wale Edun, the Minister of Finance, clarified on September 9 that no changes to the VAT rate had been implemented yet.
In February 2021, the International Monetary Fund (IMF) had also advised Nigeria’s federal government to raise VAT to at least 10% by 2022.
The bill also proposes a reduction in corporate income tax (CIT) from 30% to 27.5% by 2025, with a further reduction to 25% in 2026. Small companies with an annual turnover below N20 million would remain exempt from CIT payments.
The bill stipulates:
Zero percent CIT for small companies,
27.5% CIT for the 2025 assessment year,
25% CIT starting in 2026.
Moreover, companies with an effective tax rate lower than 15% would be required to pay an additional tax to bring their rate up to 15%, particularly for companies with an annual turnover exceeding N20 billion or those that are part of multinational groups.
On June 4, Oyedele stated that the Presidential Committee on Economic Policy and Tax Reforms recommended a 5% cut in CIT, aiming to reduce the rate from 30% to 25% to foster business growth and attract investors.
Additionally, earlier this month, the federal government gazetted withholding tax laws that will take effect on January 1, 2025.
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