- The proposed Value Added Tax (VAT) reform is expected to reduce the cost of manufacturing by 3.3% when implemented.
- Taiwo Oyedele, Chairman of the Presidential Tax Reform Committee, disclosed this in a post titled ‘Impact of Proposed VAT Reform on Cost Budget’.
- The reform is expected to have positive implications on manufacturing, contrary to the general perception that it would lead to increased costs.
According to Taiwo Oyedele, the proposed VAT reform will actually reduce the cost of manufacturing, not increase it. Oyedele clarified this point in response to questions raised during a meeting with the Organised Private Sector of Nigeria (OPSN). He explained that the reform will have a positive impact on manufacturing, reducing costs by 3.3% ¹.
Oyedele provided a comparative analysis of a typical manufacturer’s budget, highlighting the areas where the VAT reform will have an impact. These areas include:
- Raw Materials: No impact, as any VAT is currently claimable, similar to the proposed VAT law.
- Manufacturing Overhead: VAT on absorbed manufacturing assets is claimable.
- Training and Development: Any applicable VAT will be eligible as input VAT.
Overall, the proposed VAT reform is expected to have a positive impact on manufacturing, reducing costs and improving competitiveness.
