ABUJA, Nigeria (VOICE OF NAIJA)- The Nigeria Economic Summit Group (NESG) has warned that the Federal Government could experience revenue shortfalls unless it increases the value-added tax (VAT) rate as part of its ongoing tax reform efforts.
The CEO of NESG, Dr. Tayo Aduloju made the statement during an interactive media session held over the weekend in Abuja.
He stressed that while reforms in the VAT system are necessary, maintaining the current VAT rate without an increase could result in significant revenue losses for the government.
Addressing the issue, Aduloju remarked, “Without those rate hikes, it means that the government might lose some revenue.”
He pointed out that the current fiscal and tax reform initiatives aim to simplify the tax system while ensuring that the government generates enough revenue to support its ambitious budget goals.
Aduloju noted that the tax reform process must balance simplifying the system and raising the VAT rate to maintain revenue stability.
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He added that reducing the number of taxes without adjusting the VAT rate could undermine the government’s revenue base.
He concluded, “If we win on the reform of the VAT system, and even if we postpone the rate hike by three years, it will still be a win. That will immediately show efficiency, and we can attract more companies to invest in Nigeria.”
The NESG CEO emphasized that while tax reform is essential to reduce the complexity of taxes, it must not compromise revenue generation.
Aduloju also stressed the importance of unlocking investment opportunities to bolster revenue generation, revealing that Nigeria possesses enough assets to attract foreign direct investment, provided legal, regulatory, and policy hurdles are cleared.
Additionally, he called for better coordination between monetary and fiscal policies to address inflation, particularly inflation driven by high energy costs.
He argued that energy security remains a crucial factor in influencing inflation, with inefficiencies in the downstream petroleum sector contributing to ongoing price hikes.
The Trade Union Congress of Nigeria and the Nigeria Governors’ Forum have opposed the proposed VAT rate increase in the Federal Government’s Tax Reform Bills, warning that such a move could exacerbate the economic challenges faced by Nigerians.
Similarly, the House of Representatives has maintained the VAT rate at 7.5% and rejected the proposed staggered increase to 15% by 2030.