By Kenneth Okonkwo
Comprehensive tax reforms in Nigeria is long overdue. Under existing laws, taxes like Personal Income Tax (PIT), Company Income Tax (CIT), Capital Gains Tax (CGT), Petroleum Profits Tax (PPT), Value-Added Tax (VAT), Tertiary Education Tax (TET), and other taxing provisions in numerous laws are administered separately, with individual legislative frameworks. The proposed reforms seek to consolidate these numerous taxes, integrating PIT, CIT, CGT, PPT, VAT, TET, excise duties, etc, into a unified structure to reduce administrative fragmentation.
While there may be differences in approach to the understanding of the specific provisions of the new tax bills, what is not in contention is the need to review the tax laws and how we administer them to serve the nation’s overall national development agenda. Presently in Nigeria, there are more than 100 different taxes on individuals and corporate bodies extorted from Nigerians by various legal and illegal entities thereby creating a toxic environment for business.
The tax bills before the National Assembly aim to streamline Nigeria’s tax administration processes, completely overhaul the nation’s tax operations, and align them with global best practices. President Tinubu set up the Presidential Committee on Tax and Fiscal Policy Reform in August 2023, and had only one objective: to reposition the economy for better productivity and efficiency and make the operating environment for investment and businesses more conducive. The Oyedele-led committee is responsible for transforming revenue generation for sustainable development to achieve at least 18% Tax to GDP ratio within the next three years, that is, by 2026. Subsequently, in early October 2024, President Bola Ahmed Tinubu transmitted the Nigeria Tax Bill 2024 to the National Assembly.
The four bills are the Nigeria Tax Bill, the Nigeria Tax Administration Bill, the Nigeria Revenue Service (Establishment) Bill and the Joint Revenue Board Establishment Bill. The Nigeria Tax Bill seeks to eliminate multiple taxation and make Nigeria’s economy more competitive by simplifying tax obligations for businesses and individuals nationwide. The Nigeria Tax Administration Bill (NTAB) proposes new rules governing the administration of all taxes in the country. Its objective is to harmonise tax administrative processes across federal, state and local jurisdictions to ease taxpayers’ compliance and enhance the revenue for all tiers of government.
The Nigeria Revenue Service (Establishment) Bill seeks to re-establish the Federal Inland Revenue Service (FIRS) as the Nigeria Revenue Service (NRS) to better reflect its mandate as the revenue agency for the entire federation, not just the Federal Government. The Joint Revenue Board Establishment Bill proposes creating a Joint Revenue Board to replace the Joint Tax Board, covering federal and all state tax authorities, and will also establish Tax Tribunals, and the Office of Tax Ombudsman to protect taxpayers’ interests and facilitate dispute resolution.
The advantages of these bills are obvious. The bills are expected to reshape Nigeria’s fiscal framework and establish a comprehensive legal framework governing taxation of incomes, transactions, and instruments. They will harmonise multiple taxes and levies at all levels of government and also will be responsible for the unification of revenue collection functions as well as modernisation and simplification of the tax system, including the use of technology for revenue collection.
Unfortunately, like most of what this regime does, consultation with stakeholders was inadequate. They need to know more to support the amendment. The National Executive Council (NEC), made up of the 36 Governors and headed by Kashim Shettima, the Vice President, pleaded with the President to withdraw the bill for further consultation. This agreement was announced by Seyi Makinde, the Governor of Oyo State. Even the traditional rulers of Oyo State pleaded for further consultation and information before the bills are forwarded to the National Assembly for passage to no avail. PAYE and VAT are state taxes. It’s preposterous that their advice and consent will not be sort before passing an Act that will affect their economy. Tinubu bluntly stated that any further consultations and engagement with key stakeholders to address any reservations about the bills should go on while the National Assembly considers them for passage.
This great speed to pass the bills created the impression that the government had a lot of things hidden in the bill that are targeted against certain sections of the country. They range from the sublime to the ridiculous. The first impression was that the tax regime was targeted against the North and was skewed to favour Lagos State. After a careful observation, the reverse was actually the case. The Northern Governors created the impression that the VAT regime was designed to be shared based on where the headquarters of the businesses reside. But the actual situation is that derivation formula will apply in the new bill for the collection and sharing of the VAT revenues, which meant that every state will receive the VAT revenue based on what is consumed in their states. No reasonable person can fault this arrangement. However, how can they understand if they are not informed.
The refusal of the government to consult has led to the opponents of the bills alleviating some obvious bad provisions to a level of intolerance. Section 146 of the bill, which should rank as the worst provision in the bills, seeks to raise the value added tax (VAT) from 7.5 per cent to 10 per cent by 2025, with further increases to 12.5 per cent from 2026 to 2029, and 15 per cent from 2030 onwards. How can a government which increased the price of fuel from N195 at inception to more than N1,000 now, increased electricity tariff, depreciated the naira from about N450 per a dollar to about N1,650 per a dollar, etc, be contemplating increasing taxes on Nigerians?
This is unconscionable and insensitive. This government seems poised to make 90% of Nigerians very poor before leaving office, God forbid. If this government had dialogued with all the relevant stakeholders, such provisions will not find a place in the bills. For the avoidance of doubt, any law that increases the tax of Nigerians by even one kobo now is a bad law and should be discarded by the legislature. The idea of taxing the rich and exempting the poor is not a clever excuse because if the rich can not afford the tax, they will not be able to employ the poor or pay them well if employed. If the rich becomes poorer, the poor become poorest. Every person needs reduction and relief from tax payment instead of increase in tax burden.
The tax reform bills also pride itself for exempting the poor from taxation. In pursuance to this, it stipulated that anyone earning N800,000 or below per annum will be exempted from taxation. The problem with this provision is that the minimum wage is N70,000 per month which totals about N840,000 per annum. This means that even the lowest earning worker in Nigeria is not qualified to gain anything from the exemption from paying tax. Who then can benefit from it? Consultation would have saved the executive from such little little embarrassment. When these bills were initially introduced to the National Assembly for passage what happened first was apprehension due to lack of adequate consultation and information about the bills.
This apprehension later grew into resentment when the executive resisted or rejected further consultation with relevant stakeholders before submitting to the National Assembly for approval. The resentment was so palpable that some religious fundamentalists even fabricated that some of the provisions of the tax bills are against the Sharia law. They insinuated that the bills contain provisions which will tax inherited assets by 24%. Till date nobody has pointed out such provisions. When there is information vacuum, ignorant and dubious men will fill it with fabricated lies.
This government has not learned any lessons from its past failures in consultation. President Tinubu declared that fuel subsidy was gone on the inauguration ground without consulting any human being, and went further to depreciate the naira mercilessly without a cabinet. He boasted to remove the Nigerien Military Head of State by force within seven days if he does not step down as Head of State after a successful military coup in Niger Republic, without consulting the Senate which constitutionally has the power to approve any military action outside Nigeria. He closed the border with Niger Republic for months without consulting the Governors of the seven northern states sharing border with Niger because of the coup even before exploring diplomatic means of resolving the problems, etc. Nigerians have been suffering from the consequences of such decisions till date.
This government must learn that it’s not a sign of weakness to consult with the people before presenting any bill to the legislature. Democracy is the rule of the people and the Constitution mandated the government to ensure and guarantee the participation of the people in their government. (See section 14(2)(c) of the Constitution of the Federal Republic of Nigeria as amended). It’s also good politics to carry all the political actors along while seeking approval of executive bills on the floor of the National Assembly. Shettima and the Governors must have been visibly embarrassed by the action of President Tinubu to treat their request for more consultation on the bill before legislative passage with absolute contempt. These bills contain some good provisions and deserve to be passed with desired and negotiated amendments.
