VALUE ADDED TAX (VAT) IN NIGERIA: CHANGES AND CHALLENGES UNDER THE NIGERIA TAX ACT, 2025

Abstract

This paper critically examines the evolution and administration of Value Added Tax (VAT) in Nigeria, with a particular focus on the reforms introduced under the Nigerian Tax Act 2025. Using the doctrinal method, the study analyses statutory provisions, judicial decisions, and administrative practices to assess whether the 2025 reforms adequately address the longstanding challenges of VAT governance. It finds that, despite the Act's commendable innovations, such as the inclusion of digital services, the rationalisation of thresholds, and the integration of technology into compliance systems, fundamental issues persist. These include constitutional ambiguities regarding taxing powers between the Federation and the States, a weak enforcement capacity within the Federal Inland Revenue Service (FIRS), and inadequate coverage of Nigeria's expansive informal sector. The paper argues that achieving a coherent and sustainable VAT regime in Nigeria requires more than statutory amendments; it demands a holistic restructuring of the fiscal federal framework, institutional synergy, and investment in digital infrastructure for tax administration. Drawing comparative insights from the United Kingdom, South Africa, and Ghana, this study concludes that the 2025 reforms represent an important but incomplete step toward fiscal modernisation. It recommends clear constitutional delineation of taxing powers, technology-driven compliance systems, and enhanced taxpayer education as strategic imperatives for reform.