The European Union and Economic Community of West African States’ delegation to Nigeria have raised alarms regarding the subpar Value Added Tax (VAT) system in Nigeria.
At the 4th session of the Steering Committee of the Support Programme for Fiscal Transition in West Africa held in Abuja, the Head of Cooperation of the EU and ECOWAS Delegation to Nigeria, Massimo De Luca, expressed dissatisfaction with the current state of VAT compliance. De Luca attributed the dismal compliance rates to corruption and poor implementation practices prevalent in the country.
According to De Luca, while some companies may be willing to fulfill their tax obligations, the existing taxation system in Nigeria poses hindrances. He claimed that smooth VAT transactions are not enabled by the current system as intended. and stated the need for cooperation between tax authorities and businesses, which he observed is lacking in Nigeria.
Chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji, acknowledged the challenges and pledged to make the taxation system more customer-centric to facilitate easier tax payments for individuals and businesses. He announced plans to introduce a one-stop shop for all tax-related matters in the country.
VAT, a consumption tax levied on goods and services, is crucial for revenue generation. However, De Luca highlighted that the current VAT rate in Nigeria, set at five percent for all transactions, is insufficient for generating substantial revenue due to inadequate compliance.
Tax expert Andrew Onyenakwe expressed similar worries about low compliance, blaming it on systemic corruption and stressing the importance of voluntary compliance. He urged both individuals and companies to adhere to tax regulations, stating the importance of transparency and accountability in fostering a culture of compliance.
In spite of Nigeria’s strong tax legislation, Onyenakwe underlined the frequency of quasi-compliance and the necessity for more effective enforcement measures to ensure full compliance with tax obligations.
