With many stakeholders still raising their voices above the din in the ensuing debates over the controversial tax reform bills, indications are that the search for consensus building though may take a while but the dissenting voices are gradually yielding grounds, reports Ibrahim Apekhade Yusuf
ON October 3, 2024, President Bola Tinubu submitted four tax reform bills to the National Assembly based on recommendations by the Presidential Committee on Fiscal and Tax Reforms.
The bills include: Nigeria Tax Bill 2024 which seeks to establish the fiscal framework for taxation, Tax Administration Bill aimed at simplifying tax administration and reducing disputes, the Nigeria Revenue Service Establishment Bill which is to replace the Federal Inland Revenue Service Act and the Joint Revenue Board Establishment Bill to pave the way for a tax tribunal and ombudsman.
Since the debates began on the flow of the lower and upper legislative chambers tempers have risen and fallen with those opposed and pro tax reforms at the different sides of the divided holding their grounds solidly.
Things came to a head thus leading to initial calls from the National Economic Council (NEC) for the withdrawal of the bills for further consultation, but President Tinubu urged the legislative process to proceed, emphasising the importance of public hearings for citizen input.
Concerned about the differing views and the unfounded fears over the tax reform bills, the federal government has been building consensus across a spectrum of stakeholders to get their buy in, The Nation can authoritatively report.
There have been several stakeholder engagements and public forums where the issues have become the centre focus of discourse.
Speaking during a one-day roundtable on tax reform bills organized by the National Institute for Legislative and Democratic Studies (NILDS) in Abuja, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele assured Nigerians that the funds generated from Value Added Tax (VAT) under the proposed tax reform bills will not be mismanaged.
Oyedele emphasised that the bills currently before the National Assembly include specific provisions outlining how VAT proceeds should be utilized.
According to him, these measures ensure no state governor or local council authority can divert funds to non-essential or white elephant projects. He highlighted that the reforms incorporate a comprehensive framework for tax collection and expenditure, ensuring transparency and accountability.
Oyedele explained: “The reforms provide clarity on tax generation and expenditure. They emphasize addressing national priorities like education, healthcare, infrastructure, and poverty alleviation rather than unnecessary projects.”
Also a one-day stakeholder meeting led by the Civil Society Legislative Advocacy Centre, CISLAC, where the CSOs called on the federal government to build a fair and inclusive tax system that reflects alignment of fiscal policies with equity and economic stabilisation.
The Director-General of the National Orientation Agency, NOA, Mallam Lanre Issa-Onilu, who was at that the public forum on the occasion of the World HIV Day, Security Awareness, Discouraging Get Rich Quick Syndrome, World Human Rights Day and Tax Reforms in Asaba, Delta State, said the bills were designed to scrap the over 50 nuisance taxes suffered by local businesses.
According to him, VAT will no longer be calculated based on where companies have their headquarters but where the goods are consumed.
He noted that the reforms were designed to ease the burden on hardworking Nigerians, while ensuring that everyone contributed fairly.
Issa-Onilu, who was represented by Director, General Services in NOA, Mrs. Rebecca Nasamu, explained that the tax reforms bills “are four different bills that seek to bring everything about taxation and administration of tax in Nigeria under four different pieces of legislation.”
He listed the bills as the Nigeria Tax Bill; The Nigeria Tax Administration Bill; The Nigeria Revenue Service Establishment Bill and Joint Revenue Board Establishment Bill.
Issa-Onilu said: “The Nigeria Tax Bill is where all major taxes imposed on individuals and companies are clearly stated as well as the rates. The bill is just like a compendium of taxes charged in Nigeria.
“The Nigeria Tax Bill, basically amalgamated all the existing laws in which provisions for taxation were made. When passed, the bill will lead to the repeal of 11 laws that contain provisions on imposition and collection of taxes.”
On how the tax reforms would benefit Nigerians, he said the government was working to stop different levels of authority from taxing people for the same thing and ensuring that those “earning very little pay little or no taxes, helping them manage their finances better.”
He said new digital systems were being introduced to make tax payments easier and more accountable, stressing that “by supporting this effort, we can create a tax system that works for all and funds the development projects that will improve our nation.”
Meanwhile, CSOs in a communiqué issued at the end of the national tax conference in Abuja yesterday, called on the federal government to build a fair and inclusive tax system that reflects alignment of fiscal policies with equity and economic stabilisation.
The CSOs include Oxfam Nigeria, ActionAid, ChristianAid, the Nigerian Labour Congress, NLC, International Budget Partnership, IBP, Centre for Democracy and Development, CDD, and Civil Society Legislative Advocacy Centre, CISLAC, while some of the government institutions in attendance included the federal ministry of finance and the West Africa Tax Administration Forum, WATAF.
The communiqué raised concerns about key issues identified, including the timing of a VAT increase, which is considered problematic, given the current inflation rate exceeding 30 per cent; the degree of involvement of all stakeholders in determining the classification of essential and non-essential items in the proposed VAT reform.
Others are the need for data-driven evidence to justify both the equity and benefits of the proposed VAT sharing formula across the different tiers of government; the need for the government to address the significant infrastructure gap in Nigeria; review of the technical framework governing tax incentives and waivers and their effective administration to ensure that they are being utilised efficiently and contribute to the country’s economic development, among others.
The communiqué read: “The 2024 National Tax Conference concluded with a united call for reforms that align fiscal policies with equity and economic stabilisation.
“These recommendations underscore the collective effort needed to build a fair and inclusive tax system that fosters sustainable development and equitable growth for all Nigerians.
“The tax system should be made more progressive to ensure that all taxpayers, especially big businesses and high-net-worth individuals pay their fair share of taxes.
“The proposed Personal Income Tax (PIT) rate risks eroding the relative gains from the minimum wage increase, as most low-income earners would exceed the N800,000 annual threshold. Rather than raising the rate for the second bracket to 15%, we recommend capping it at 10%, considering the inflationary pressures on the cost of living in Nigeria. This income group is already taxed at a 7% PIT rate when adjusted for the real value of their earnings. To offset the potential revenue shortfall from this adjustment, we propose increasing the rates for the last income bracket (above 50 million Naira) to 26%.
“The Presidential Committee should make available to the public, detailed data on the current VAT compliance rate, highlighting challenges leading to underperformance, and proffering solutions for improvement.
“The National Assembly to ensure the passage of the sections of the proposed tax bill that aim to harmonise taxes and digitize tax administration. In anticipation of this, we urge the government to expedite the process of developing an effective implementation framework and ensuring its effective use.
“In collaboration with the Federal Inland Revenue Service, FIRS, the presidential committee should release a detailed framework outlining how VAT changes will be enforced, ensuring consistency and transparency across the system.
“Government should actively engage in public education and awareness campaigns to clarify the goals of fiscal reforms, focusing on fairness and equity.
“Provide platforms for wider citizens’ engagement in the reform process to ensure their concerns are addressed and integrated into final policies.
“A portion of the additional revenue should be redistributed to benefit the owner tax brackets and the most vulnerable populations (women, girls and persons with disabilities).
“Include clear indicators for tracking and monitoring gender inclusivity in the proposed fiscal policy and tax reform.”
“Advise against increasing VAT rates during a period of high inflation, as it may exacerbate inflationary pressures and reduce the purchasing power of Nigerians.
“Review and expand the list of VAT exemptions to include all necessary items for basic living, such as energy sources (electricity, cooking gas, fuel) and food-related items, ensuring that they are accessible to all Nigerians.
“Tax expenditure should be subject to legislation to ensure cost effectiveness and an established framework to monitor milestones.”
Also giving fresh insights on the growing level of groundswell of support for the tax reform bills, Senator Abubakar Atiku Bagudu, Minister of Budget and Economic Planning, while addressing some selected journalists in Abuja said many of those opposed to it across the different divides are being properly informed of the merits and its benefits to the socioeconomic development of the country.
According to him, President Bola Ahmed Tinubu is very committed to ensuring that Nigeria works for everybody.
Shedding lights on the sections of the bill that has raised a lot of dusts, Bagudu said, “Today, if one looks at one of the tax bills, particularly the one that is, I think, generating the most controversy, is about 247 pages long, a lot of it with definitions, technical jargons that you need guidance in order to understand. Secondly, that legislation repealed about 12 laws that have been in existence. So if you are a small scale businessman or businesswoman or a bank, you need a compliance unit that understands those 12 laws in order not to run afoul of one.
“Equally, that legislation is amending other 19 laws, as well as revoking laws. So, again, why this controversy? If a legislation is submitted to National Assembly, every part of Nigeria is represented, it could be that I’m from a fishing community, and if somebody say, I want to come, under the river there is diamond mine, and I have been given licence, I have the right to ask, okay, what will happen to my fishing community? I have the right to ask, and that’s why I’m there, and then debate it and say, okay, even if we are doing it for the greater good, how can we accommodate my fishing communities? It’s not a monologue.
“Even when the Senate said six weeks for a public hearing, we can debate about time. We can debate about arguments. But what is wrong is for us, given the great effort that we are doing to put our economy in the right direction, to be swayed by arguments of tribalism, of religion, of sentimental arguments, the President and indeed his government, is determined that Nigeria will take its pride of place in the comity of nations. We are doing infrastructure work that shows the kind of commitment he has to Nigerians. He is supporting different states in their various quests to develop. He has requested all state governors to give him what can be done more in their states, so that more economic activities can be generated.
“Some of the reform initiatives, energy transition, for example, are for all parts of Nigeria. Security, additional investment in security is for everyone in Nigeria. I’m just coming out of the Bankers’ Committee meeting. Part of it, they were complaining that they did not like the windfall tax. That’s Nigeria for you. Maybe some Nigerians will say, ah, it’s good that the bankers have been taxed. But we have a president who believes in Nigeria, who is a committed democrat, so he understands that people have the right to debate. But what is annoying is when people, in order to make a point, maybe they take resort to sentiments that can weaken our federation.
On insinuations that the reform will lead to unemployment, especially in the north, Bagudu said such a narrative has no iota of truth in it.
“That is why I told you that the intended benefits of this tax legislation, for example, is to simplify tax compliance for small companies. We have been investing in MSMEs. We have been investing in nano credits. We want them to be the engines of growth. How can they be the engines of growth if you have a wild list of legislations that they don’t even know how to comply with? I met with a European Ambassador recently, an ambassador from one of the European countries, and he told me that, because of some of our challenges, multiple regulatory challenges. Says he knows of a company in his country, that when they invoice to Cameroon or Ghana, they invoice at least 40% cheaper than when they invoice to Nigeria, so one has to be holistic. We are under pressure that Nigeria maintains a higher level of growth. We want to generate growth. We will not do anything that will sabotage employment generation. Any measure we take is intended to generate major economic activity and growth. That is what we can be, even as politicians, to talk from a self-serving interest, that is what I can get a clap for not the other way around. And indeed, Mr. President is leading that drive.”
By Ibrahim Apekhade Yusuf @TheNATION
