Remove VAT From Diesel, Tax Committee’s Boss Urges …MDAs may be stopped from tax collection

The Chairman, Presidential Committee on Tax Policy and Fiscal Reforms, Taiwo Oyedele, has said stated the need to remove Value Added Tax (VAT) on Automotive Gas Oil (AGO), popularly known as diesel to offset the impact of removal of petrol subsidy.

He said in order to ease the economic strains warranted by the removal of fuel subsidy, the committee need consider  suspending VAT on diesel.

Oyedele, formerly a Fiscal Policy Partner and Africa Tax Leader at Price Waterhouse Coopers (PwC), emphasised the urgency to address pressing economic concerns within the initial 30 days of the committee’s tenure.

“Personally, for example, this is not promising that it would be done. I think that we should suspend VAT on diesel because we removed fuel subsidy on petrol and prices are going up. We are going to table it before the committee. These are the things we want to do in the first 30 days”, he said.

Oyedele’s committee was inaugurated by President Bola Tinubu in Abuja on Tuesday and is charged with accomplishing crucial tax reforms, streamlining and harmonisation of tax laws, executive order issuance, regulatory implementation, and more over the following six months.

Although the committee has a one-year timeline for policy implementation, Oyedele clarified that the 30-day, six-month, and one-year milestones run concurrently.

The committee also intends to address excessive bank charges and reduce the exorbitant number of levies and taxes paid by businesses.

Oyedele revealed that businesses are burdened by as many as 65 to 70 different taxes and levies, while the committee’s objective is to curtail this number to around 10.

He said the Nigeria Customs Service (NCS) and 62 other Ministries, Departments and Agencies (MDAs) of the Federal Government should not collect revenue directly.

He, however, said the revenue collecting agencies of the federation can continue to collect revenue until a definite decision is taken to stop the practice.

He said the details of stopping revenue collecting agencies other than the Federal Inland Revenue Service (FIRS) from collecting such revenues “will be discussed by the committee with extensive engagements with key stakeholders including the affected MDAs”.

According to him, “it’s still a long way as many of the MDAs revenue collection functions are enshrined in their establishment laws”.

Oyedele had on Channels TV had hinted that the Federal Inland Revenue Service (FIRS) will now be responsible for collecting revenue for the MDAs.

He explained that this change will bring several benefits, including improved efficiency and reduced collection costs.

Oyedele stated that the current cost of collection is high due to the numerous agencies involved, noting that the MDAs are being distracted from their primary functions and are not equipped to efficiently collect revenue.

By transferring the revenue collection duties to the FIRS, Oyedele believed two advantages can be achieved, saying there will be a reduction in collection costs and an improvement in efficiency, and that the MDAs can focus on their core responsibilities, ultimately benefiting the economy.

Oyedele emphasized that agencies like Customs should concentrate on trade facilitation and border protection, while the NCC should solely regulate telecommunications.

Revenue collection, he said, can be outsourced to specialized entities like the FIRS, leading to increased transparency and accountability in how funds are utilized.

Additionally, Oyedele noted the existence of a significant tax gap, estimated to be around N20 trillion or more, stressing the importance of focusing on major taxes such as Value Added Tax, Corporate Income Tax, and Personal Income Tax.

“Many individuals, particularly the middle class and elite, are not fully compliant with their tax obligations, with some only paying a fraction of what they should be contributing”, he said.

According to him, the Federal Inland Revenue Service (FIRS) is best-suited to collect revenue for the MDAs.

“Ironically, our cost of collection is one of the highest. And the reason for that is that we’ve got all manners of agencies. The Federal Government alone, we have 63 MDAs that were given revenue targets last year, no; actually in the 2023 budget”, he said.

“And two things that would come up from that: on one hand, these agencies are being distracted from doing their primary function which is to facilitate the economy. Number two, they were not set up to collect revenue, so, they won’t be able to collect revenue efficiently.

“So, move those revenue collection function to the FIRS. It has two advantages: the cost of collection and efficiency will improve, these guys will focus on their work, and the economy will benefit as a result.