The European Union (EU) and the Economic Community of West African States (ECOWAS) delegation to Nigeria have raised concerns over the effectiveness of Nigeria’s Value Added Tax (VAT) system, stating that it falls short of ideal standards.
Speaking at the 4th session of the Steering Committee of the Support Programme for Fiscal Transition in West Africa in Abuja, Massimo De Luca, the Head of Cooperation of the EU and ECOWAS Delegation to Nigeria, attributed the low compliance with VAT in Nigeria to corruption and poor implementation.
De Luca highlighted the inability of the current taxation system to facilitate proper VAT collection, emphasizing that while some companies may be willing to fulfill their tax obligations, the existing framework often hinders their ability to do so effectively.
Zacch Adedeji, Chairman of the Federal Inland Revenue Service (FIRS), outlined plans to make the taxation system more customer-centric to encourage easier tax payments for individuals and businesses. He also announced the introduction of a centralized tax payment platform, aiming to streamline the tax payment process.
VAT, a consumption tax levied on goods and services, is crucial for revenue generation in Nigeria. However, De Luca criticized the current VAT system, stating that it does not allow companies to recover taxes as intended.
De Luca expressed concerns that many companies, especially Small and Medium Enterprises (SMEs), struggle to recover their taxes from consumers due to the existing VAT structure.
Furthermore, De Luca emphasized the need for enhanced cooperation between tax authorities and businesses to improve VAT compliance and revenue generation in Nigeria.
Tax expert Andrew Onyenakwe echoed these sentiments, highlighting widespread issues of tax evasion and poor compliance within Nigeria’s tax system. While emphasizing the importance of compliance, Onyenakwe also cited corruption as a major factor contributing to low tax compliance rates among taxpayers.
The statements from EU/ECOWAS delegates and local tax experts underscore the urgent need for comprehensive reforms to strengthen VAT compliance and revenue generation in Nigeria.
