Tax Reform Bills: TUC Objects to Increase in Value Added Tax Rate

Tax Reform Bills: TUC Objects to Increase in Value Added Tax Rate

The Trade Union Congress has expressed its opposition to an aspect of the tax reform bills outlined by the Federal Government of Nigeria that involves an increase in the value-added tax rate, stating that it would increase economic hardship in the country.  The TUC President, Festus Osifo, said this in Abuja after the Union National

The Trade Union Congress has expressed its opposition to an aspect of the tax reform bills outlined by the Federal Government of Nigeria that involves an increase in the value-added tax rate, stating that it would increase economic hardship in the country. 

The TUC President, Festus Osifo, said this in Abuja after the Union National Executive Council meeting, insisting that the VAT increase is coming at a time when Nigerians are struggling to survive the economic decline as a result of inflation, and the high cost of living is prevalent across the country. 

President Bola Tinubu has submitted four bills to the National Assembly for the review and reform of the existing tax law in the country. The four bills are the Nigeria Tax Bill 2024, which aims to reform the nation’s taxation policy, and the Tax Administration Bill, which aims to establish a clear and simple legal framework and settle all of the nation’s ongoing tax disputes.

The bills in question are the Nigeria Revenue Service Establishment Bill, which aims to replace the existing Federal Inland Revenue Service Act and establish the Nigerian Revenue Service, and the Joint Revenue Board Establishment Bill, which aims to establish a new tax tribunal and tax ombudsman.

One of the bills also aims at changing the Value Added Tax (VAT) sharing formula by reducing the federal government’s share from 15 percent to 10 percent but increasing the state derivation sharing from 20 percent to 60 percent on generation and consumption. The Federal Government also proposed a phased VAT hike from the current 7.5% to 10%, 12.5%, and ultimately 15%.

While the proposed reform has continued to be a subject of controversy across the country, leading to debate among the stakeholders, the trade union has also condemned the government’s intention to increase the VAT as inconsiderate to the Nigerian people.

“Allowing the Value Added Tax rate to remain at 7.5 percent is in the best interest of the nation. Increasing it now would impose an additional burden on households and businesses already struggling with economic challenges. With inflation, unemployment, and the cost of living on the rise, higher taxes could stifle economic growth and erode consumer purchasing power.”

Osifo also asked the government to increase the tax exemption from the proposed N800,000 to N2,500,000 per annum for low-income earners to cope with the country’s economy.

We should raise the threshold for tax exemptions to N2,500,000 annually. This adjustment would offer much-needed relief to low-income earners, enabling them to cope with the current economic challenges.”

“As discussions on the Tax Reform Bill continue, it is our hope that the focus will remain on fostering economic growth and improving living conditions for all Nigerians.”.

It should be recalled that the Governors Forum and Presidential Committee Tax Policy and Fiscal Reform last Wednesday reached a consensus on the controversial bills, in which both parties agreed to the amendment of the proposed Value Added Tax law.

 

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