Key Points
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Nigeria VAT reforms to yield N4 trillion yearly for states.
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FIRS introduces digital tracking to improve tax transparency.
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Fiscal decentralization to enhance state economic autonomy.
The Federal Inland Revenue Service (FIRS) and the Ministry of Finance are pushing for big changes to the Value Added Tax (VAT) system in Nigeria.
These changes are expected to bring in more than N4 trillion a year for all 36 states.
As part of President Bola Tinubu’s plan to restructure the country’s finances, this policy aims to give more power to state and local governments, make taxes more efficient, and cut down on the country’s reliance on federal funds.
Zacch Adedeji, the Executive Chairman of the FIRS, spoke at the National Economic Council (NEC) meeting in Abuja and said that the reforms were meant to “ensure fairness, efficiency, and fiscal balance.” He said that the new VAT system would focus on digital monitoring, collecting taxes based on where they come from, and an automated settlement system that sends money to the right places.
Changes to VAT to increase state revenue
The new plan says that VAT collections will be more than N6 trillion by 2025, and states will get more than N4 trillion once the new formula goes into effect. Adedeji said that the changes will make the current tax systems work better together, close loopholes, and make it easier for businesses to follow the rules.
He also said that the FIRS is working with the Nigeria Governors’ Forum, which is led by AbdulRahman AbdulRazaq, the governor of Kwara State, to deal with state-level issues with VAT allocation and make sure that it is fair. The new structure also hopes to cut down on the arguments that came up after the 2021 VAT collection issue between Lagos and Rivers States.
To make VAT changes, use technology and openness
Wale Edun, the Minister of Finance and the Minister in Charge of the Economy, said that the changes fit with the government’s goal of making government more digital and open about its finances. He said that the FIRS has set up an e-VAT platform across the country to keep an eye on transactions in real time and stop revenue leaks.
“This initiative builds trust in the tax system and makes sure that every kobo collected goes directly to Nigerians,” Edun said, stressing that more VAT money will help pay for education, healthcare, and infrastructure at the state level.
Fiscal changes to give the economy more freedom
Dr. Muda Yusuf of the Centre for the Promotion of Private Enterprise and other economists praised the move as a big step towards fiscal federalism. He said the change would encourage states to do more business, bring in more money, and be more responsible.
But he warned that success would depend on good implementation, building capacity, and open auditing.
As fiscal reforms spread throughout the federation, the Tinubu administration’s overhaul of the VAT could change Nigeria’s tax system by moving power, money, and responsibility closer to the states.
