Nigeria’s Senate has approved sweeping tax reforms, and one of the most notable elements is the restructuring of the Value Added Tax (VAT) system.
While the VAT rate remains unchanged at 7.5%, despite proposals to increase it, major changes have been introduced to how VAT revenue will be shared and administered:
🔸 New VAT Revenue Sharing Formula
VAT will now be allocated based on where goods and services are consumed, not where businesses file returns. This change promotes fairness and encourages local economic activity. States that generate more consumption will now receive more revenue.
🔸 No VAT on Essentials
The new tax laws exempt essential services such as public transport and basic food items from VAT, reducing the burden on low-income Nigerians.
🔸 No VAT Rate Hike
Despite earlier discussions, the government chose not to raise VAT to 15%. This decision avoids adding further pressure on consumers and businesses.
🔸 Digital Economy Inclusion
VAT is now extended to digital services, ensuring fairness in a growing sector of the economy.
These reforms aim to make Nigeria’s VAT system fairer, more efficient, and aligned with global practices, while boosting trust in the tax system and improving revenue for national development.
As Senate President Godswill Akpabio said, “These are legacy laws that will define Nigeria’s economic future.”
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