The controversy that trailed the tax reform bills of President Bola Ahmed Tinubu is not entirely unexpected considering the fact that nobody likes the tax man. Many Nigerians, including the affluent are used to the eras of not paying tax or not paying the expected tax. Tax evasion is not new in Nigeria. Since colonial government and after independence, tax has remained a contentious issue. The tax man is seen as an enemy, an intruder and an interloper. He is seen as a disruptor of things and one who reaps from where he did not sow.
This is why the people see tax as a colonial imposition and the white man’s problem. People run away when the tax man is around. This is why the tax man is loathed by the citizens. The Aba Women’s Riot of 1929 was mainly against imposition of tax on women and decreasing role of women in the polity, especially the marketplace due to colonialism. It can also be regarded as the first radical feminist movement in Nigeria.
It is against this background that one can understand and appreciate the controversy and even the outright opposition of the current tax reform bills of the federal government by some Nigerians. The four tax reform bills, which have passed second reading at the National Assembly (NASS) include: The Nigeria Tax Bill, Tax Administration Bill, Nigeria Revenue Service Establishment Bill and Joint Revenue Board Establishment Bill.
The key proposals of the bills, as explained by the chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, include the elimination of minimum tax for loss-making companies and introduction of a 15 percent effective tax rate on profits for large companies, the removal of Value Added Tax (VAT) on essential goods and services, increase in tax thresholds for personal income tax, to exempt low income earners from tax and the simplification of the tax system by reducing the number of taxes and levies.
It has also been explained that those earning below the national minimum wage will be exempted from the Pay As You Earn (PAYE) deductions. Similarly, small businesses with annual turnover of N50million or less will also be exempted from taxes. This measure will enhance job creation and deepen the ease of doing business. These incentives will encourage the establishment of more Small Medium Enterprises (SMEs) as well as more investments.
Also, company income tax, which is currently 30 percent, will be reduced to 25 percent. This gesture will last for two years. To curtail the incidence of double or multiple taxation, taxes formerly paid by companies under various tax heads such as 2.5 percent education tax and 0.25 percent NASENI tax, have been harmonized into a development levy of 2 percent. And by 2030 this will be used to fund the newly established student loan scheme. Under the new tax reform, the state governments will share 55 percent of VAT revenue as opposed to the current 15 percent to 10 percent sharing formula.
But, the local governments’ share of VAT revenue will not be affected. Basic items consumed by Nigerians like food items, medical services and pharmaceuticals, educational fees and electricity, among others, are also exempted from VAT. States will also benefit from VAT revenue based on actual consumption instead of where the company is based. The tax experts used MTN which is based in Lagos to illustrate this consumption aspect of VAT revenue sharing formula.
Despite the envisaged benefits of the proposed new tax regime, many Nigerians, especially politicians from the North are opposed to the tax reform bills. And they have so many reasons for opposing them. One, they reasoned that the timing was wrong. They urged for more consultations with some stakeholders such as governors, traditional rulers and others. However, there are people in the North who support the tax reform bills hailing the intervention as the best in the history of taxation in Nigeria. People in the South can be said to be in total support of the tax reform bills. The Ohanaeze Ndigbo has reportedly supported it. The South-East governors have not said anything. Politicians from the zone have not said anything. Their silence signals agreement.
In spite of so many explanations, meetings and consultations, the controversy trailing the tax reform bills is yet to abate. Why? Government did not consult widely with critical stakeholders, the governors, politicians, traders, market men and women. The government and NASS appear to be in a hurry to pass the tax reform bills despite mounting opposition. Why the haste as the governor of Borno State, Prof. Babagana Zulum, would like to ask? The tax people have not sufficiently addressed Zulum’s concerns. Perhaps too, they have not fully addressed other concerns against the tax bills.
The television stations have been doing enough to sensitize and even educate the people on the tax reform bills and the expected benefits. The recent special Townhall hearing on Tax reform Bills organized by Channels TV anchored by Seun Okinbaloye enabled the panelists, audience and other Nigerians to begin to understand the main issues of the tax reform bills. Nigerians will need more of such interactions on the tax bills. The panelists included, the chairman of the Presidential Committee on Fiscal Policy and Tax reforms, Taiwo Oyedele, former Speaker of the House of Representatives, Yakubu Dogara, Baba Yusuf, Paul Alaje and Chibuzor Michael. The NASS members should hold on while the education and enlightenment Townhall meetings are encouraged.
Tax issues are not easily understood by ordinary people. It is a subject that the experts would have to explain to ordinary people before they can understand the details. It is because of the unending controversy over the tax reform bills that might have prompted the president to order for a review of the entire bills. This window of opportunity will enable those opposing some aspects of the bills to point them out. It is just not right for one person or group to say the tax reform bills are bad and should be withdrawn or something like that. Let the specific offensive aspects of the bills be pointed out for correction.
No doubt, the tax reform bills will overhaul our taxation system and remove the era of multiple taxation and make the states more productive. Instructively, the new tax regime will not entertain the use of tax consultants or revenue collection consultants. Under the new tax regime, there will be no cash payment. This will expectedly abolish or considerably curb the corruption in the nation’s tax system. With 60 official duties and 200 unofficial duties, and over 133million people who are multidimensional poor, the nation’s tax system is long overdue for reforms.
However, the Presidential Committee on Fiscal Policy and Tax Reforms still has a lot of work to do before most Nigerians will be carried along. The committee has not engaged the media enough on this. They must engage the media and explain the new tax regime in a comprehensive and concise language that the people will understand. The committee should further engage the governors and others who are still opposed to the tax reform bills until they come on board. Instead of rushing to pass the tax reform bills, there is need for more consultations, lobbying, and explanations before there will be a consensus on the matter. The most contentious issue of the new tax bills is the sharing formula of VAT.
Meanwhile, the Senate has suspended further action on the tax bills and raised a committee to meet with federal government delegation led by the Attorney-General of the Federation (AGF) to address the grey areas. It is hoped that the team will finally resolve all the contentious issues on the tax reform bills.
Author: Robert Obiora
