Lagos, Nigeria – The Federal Government’s ambitious tax reform proposal has sparked widespread debate among lawmakers, business leaders, and stakeholders. With a planned increase in Value Added Tax (VAT) from 7.5% to 10% in 2025, then gradually to 15% by 2030, many in the Organised Private Sector (OPS) are voicing strong opposition, arguing that the tax hike could discourage investment and burden businesses.
Northern Governors Push Back on Tax Reforms
One of the biggest roadblocks came from the Northern Governors’ Forum, alongside the National Economic Council and northern lawmakers, who initially opposed the tax bills, claiming they disproportionately affected the North. A compromise was finally reached on the VAT revenue-sharing formula, which will now be distributed as follows:
- 50% based on equality (shared equally among states)
- 30% based on derivation (states that generate more VAT get more)
- 20% based on population
This new formula aims to balance economic disparities and ensure fair distribution across regions.
Corporate Tax Cut Welcomed, but Free Trade Zones at Risk
In a move welcomed by large businesses, the Nigeria Tax Bill 2024 proposes a reduction in corporate income tax from 30% to 27.5% in 2025 and further to 25% by 2026. However, business leaders, particularly from the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), have raised concerns about the potential removal of tax exemptions for businesses operating in Free Trade Zones (FTZs), arguing that it could stifle economic growth and foreign direct investment.
TETFUND Funding in Jeopardy
Another contentious issue is the proposed abolition of the education tax by 2030, a move that has been strongly opposed by the Association of National Accountants of Nigeria (ANAN). The tax currently funds TETFUND, which plays a critical role in financing infrastructure and research in Nigeria’s universities.
Revenue Mobilisation Commission Weighs In
The Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) has expressed its support for the tax reforms but insists that VAT distribution should align with the governors’ proposal to prevent economic imbalance among states.
Senate President Akpabio Calls for Collaboration
In response to the heated debate, Senate President Godswill Akpabio emphasized the need for synergy between the Federal Government, state governments, private sector stakeholders, and tax experts to modernize Nigeria’s tax system without stifling economic growth.
What Happens Next?
With the public hearing ongoing, more stakeholders are expected to present their positions. The Senate will deliberate on possible amendments before making a final decision on VAT increases, Free Trade Zones, and the education tax.
Stay tuned for further updates as Nigeria navigates one of its most significant tax policy shifts in recent history.
