By Isah Aliyu Chiroma
Nigeria’s Value Added Tax (VAT) system is riddled with inefficiencies, according to the European Union (EU).
This assertion came from Massimo De Luca, Head of Cooperation and Delegation of the EU to Nigeria and ECOWAS, at the fourth Session of the Steering Committee of the Support Programme for Fiscal Transition in West Africa (PAFT) in Abuja yesterday.
De Luca pinpointed two key shortcomings. First was that the system lacks transparency and certainty. “Businesses cannot be sure of recouping the VAT they pay on purchases, making compliance difficult, especially for Small and Medium Enterprises (SMEs). Secondly, the standard VAT rate of 7.5 percent is too low, hindering revenue generation,”De Luca said. While inflation is a concern, De Luca suggested applying a differentiated VAT structure, with higher rates on luxury goods and specific services.
This criticism comes amid a five-year programme funded by the EU, which aims to improve tax collection across West Africa. De Luca emphasised the importance of a robust system for attracting investment. “Unpredictable regulations and a lack of transparency discourage investors,” he said.
De Luca acknowledged companies’ frustrations with sudden policy changes, citing the recent $15,000 expatriate levy as an example. He advocated for a predictable system where businesses contribute fairly through a well-structured tax regime.
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