The 2025 VAT Increase Bill is being considered by the National Assembly.
Economic Repercussions for Nigeria
Introduction: Proposal for a 2025 VAT Increase
A bill that has the potential to drastically change Nigeria’s tax system is presently being discussed by the National Assembly. The Value-Added Tax (VAT) would increase from its current rate of 7.5% to 10% by 2025, then to 12.5% between 2026 and 2029, and finally to 15% by 2030 if the measure is approved. It is anticipated that this idea, which is a component of larger economic reforms, will have an impact on businesses and consumers nationwide.
Timeline for the VAT Increase
The paper in question states that the VAT rise will be implemented gradually:
VAT will increase to 10% in 2025.
VAT will rise to 12.5% in 2026–2029.
In a nation where household incomes are already being negatively impacted by inflation and economic instability, the proposed VAT hikes have generated a great deal of public discussion.
Previous Refusals and Growing Conjecture
For months, there have been rumors that a VAT increase is imminent. Wale Edun, the Coordinating Minister of the Economy and Minister of Finance, rejected any intention to increase VAT in September 2024. The National Assembly’s present draft, however, appears to go against what the minister has said in the past.
Nigeria had previously contemplated similar measures prior to this VAT proposal. The chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, proposed in May 2024 that Nigeria should increase its VAT rates to bring them in line with those of other African countries.
Business Sector: Possible Advantages and Tax Reductions
The corporate sector stands to benefit from another aspect of the proposed measure, even though the VAT increase would probably affect consumers. Apart from increasing VAT, the law aims to reduce the existing 30% Corporate Income Tax (CIT) to 27.5% by 2025 and then to 25% by 2026. This tax cut is thought to be a means of attracting corporate investment, promoting expansion, and strengthening Nigeria’s economy.
Effect on Customers: A Divisive Choice
Nigerian consumers are currently suffering from the effects of a weak economy and rising inflation as a result of the proposed VAT hike. A greater consumption tax would probably make the already high cost of basic goods even worse.
Additionally, companies with yearly sales under N20 million will not be subject to CIT, which could help small and medium-sized firms (SMEs). These reductions are a component of the government’s larger plan to increase investment and boost the economy in Nigeria when the subsidies expire.
Debate Concerning the Bill
Many have questioned the bill’s impact and timeliness, which has caused a great deal of debate. Lower corporate taxes may help firms, but the VAT increase may undo these benefits by lowering consumer demand. According to experts, the government needs to strike a balance between the burden on regular Nigerians who are already struggling financially and the need for more money.
Reform Objectives and Long-Term Goals
The government’s broader plan to overhaul Nigeria’s tax structure includes the planned VAT increase. The rise, according to supporters, is required to improve government revenue and lessen the nation’s dependency on oil exports. They contend that raising consumption taxes will support infrastructure improvements, fill budget gaps, and enhance public services.
Conclusion: Nigeria’s Economy Needs to Strike a Balance
The National Assembly’s bill highlights significant issues about the trade-offs between immediate income generation and long-term economic growth as Nigeria moves toward a higher VAT regime. Reduced taxes might help the corporate sector, but the cost to consumers could impede economic recovery and make already difficult issues worse.
In order to make sure that these reforms result in shared prosperity rather than increasing inequality, the government must address the concerns of both businesses and the broader public as this law moves forward.
Join Our Social Media Channels:
WhatsApp: NaijaEyes
Facebook: NaijaEyes
Twitter: NaijaEyes
Instagram: NaijaEyes
TikTok: NaijaEyes
