House of Representatives Passes Four Major Tax Reform Bills, Revises VAT Distribution

The House of Representatives has passed four significant tax reform bills aimed at overhauling Nigeria’s tax system. Among the key changes is a revision of the Value Added Tax (VAT) distribution formula, while the current VAT rate of 7.5% remains unchanged.

The passage of these bills marks a crucial step in the federal government’s broader plan to modernize tax laws, improve revenue generation, and ensure a fairer allocation of resources among the three tiers of government. Lawmakers highlighted the importance of streamlining the tax system to make it more efficient and equitable, particularly in light of Nigeria’s ongoing economic challenges.

One of the most notable provisions in the reforms is the adjustment of the VAT revenue-sharing formula. Previously, VAT proceeds were distributed in a manner that some states and local governments argued did not reflect their contributions to the national economy. The new formula is expected to create a more balanced distribution, ensuring that states and local governments receive a larger share of VAT revenue.

Supporters of the reforms believe that this adjustment will empower subnational governments with greater financial autonomy, enabling them to invest in critical infrastructure, education, healthcare, and other services. Additionally, the bills aim to simplify tax compliance, reduce ambiguities in existing laws, and close loopholes that have previously led to revenue losses.

However, the reforms have sparked debate among lawmakers and the public. Some argue that the bills do not go far enough to address Nigeria’s overreliance on oil revenue, while others are concerned that changes in VAT distribution could create disparities between states, potentially favoring those with larger commercial hubs.

The decision to maintain the VAT rate at 7.5% was seen as a relief for businesses and consumers who had expressed fears that a rate hike could further strain household budgets and dampen economic activity. Lawmakers emphasized that the focus of the reforms is not to increase taxes but to improve collection efficiency and ensure fairer distribution.

As the bills move to the Senate for consideration, stakeholders from various sectors are closely watching the process. Many see the reforms as a necessary step toward strengthening Nigeria’s fiscal framework, while others believe that deeper structural changes are required to achieve long-term economic growth and stability.

The successful passage of these bills in the House represents a major milestone in Nigeria’s tax reform journey. It underscores the government’s commitment to creating a more transparent and equitable tax system, even as discussions around implementation and impact continue to unfold.