Proposed VAT Reform to Cut Manufacturing Costs by 3.3%

The proposed Value Added Tax (VAT) reform in Nigeria is set to reduce manufacturing costs by approximately 3.3 percent, according to the Chairman of the Presidential Tax Reform Committee, Taiwo Oyedele.  

In a post titled ‘Impact of Proposed VAT Reform on Cost Budget’, Oyedele provided a comparative analysis of how the reform would affect a typical manufacturer’s budget. He clarified issues raised during a recent meeting with the Organised Private Sector of Nigeria (OPSN), highlighting the reform’s positive implications for the manufacturing sector.  

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According to Oyedele, VAT would become claimable on several cost components, including professional fees, communications, marketing, distribution, plant and equipment, and right-of-use assets. He noted that while salaries and wages remain outside the scope of VAT, and finance costs would see negligible impact, the overall cost borne by manufacturers is expected to decline from 1,000 to 967, representing a 3.3 percent reduction.  

The analysis also compared the benefits of VAT input claims under the proposed law with the deductions for Company Income Tax (CIT) or capital allowance under the current system. Oyedele emphasised that the reform, despite the VAT rate increase, would result in tangible cost savings for manufacturers.