Nigeria committed to tax reforms – Tinubu

 President Bola Tinubu has reaffirmed Nigeria’s commitment to comprehensive tax reforms, emphasizing their necessity for long-term economic stability and growth. These reforms aim to simplify the tax system, enhance revenue generation, and attract both domestic and international investments.

Key Components of the Tax Reforms

• Value-Added Tax (VAT) Increase: The government plans to raise the VAT rate from 7.5% to 12.5% by 2026, with exemptions for essential items such as food and medicine. This move is intended to reduce inflation and broaden the tax base . 
• Unified Tax Administration: A proposed bill seeks to rename the Federal Inland Revenue Service (FIRS) to the Nigeria Revenue Service (NRS), consolidating tax collection across federal, state, and local governments into a single entity. This restructuring aims to reduce administrative overlap and enhance efficiency . 
• Reduction of Tax Levies: The administration is working to decrease the number of officially collectible taxes and levies, which currently exceed 60, to a more manageable number, potentially fewer than 10. This simplification is expected to reduce compliance costs and improve revenue collection . 
• Revenue Sharing Adjustments: Proposed changes to VAT distribution suggest allocating 60% based on revenue contribution and 20% based on population. This has sparked debate, particularly among northern states, which argue that the new formula may disadvantage them . 

Political and Public Reception

While the reforms have received support from various sectors, including the Senate, they have also faced resistance. Opponents express concerns over the potential economic hardships they may impose on citizens and businesses. President Tinubu has acknowledged these concerns but maintains that the reforms are essential for the nation’s economic future .

Economic Implications

The World Bank has projected a 3.6% GDP growth for Nigeria in 2025, attributing this to fiscal improvements and reforms, including better tax administration and increased remittances. However, challenges such as high inflation persist, underscoring the need for continued economic reforms .

In summary, while Nigeria’s tax reforms are designed to modernize the fiscal system and stimulate economic growth, their success will depend on effective implementation and addressing the concerns of all stakeholders.